HEALS Act: could businesses have a second shot at Paycheck Protection loans?

Entrepreneurs who are struggling and took a federal Paycheck Protection Program loan may get a second infusion of cash if they are running out of funding.

Republican Senators Marco Rubio and Susan Collins sponsor a measure included in the HEALS Act that proposes another round of coronavirus relief funding. 

The measure, which is dubbed the Continuing Small Business Recovery and Paycheck Protection Act, would permit certain small-business owners to borrow from the program a second time.

The allure of the program that started on April 3 is that the loans are forgivable if borrowers spend at least 60% of the proceeds on payroll costs. Those who fall short may be eligible for partial forgiveness.

With a surge of Covid-19 cases and many small businesses facing the prospect of additional closures in many states, after they’ve run out of their first round of PPP funding, a second loan would be of great help.

New conditions 

The Continuing Small Business Recovery and Paycheck Protection sets conditions for applicants.

a)    They can’t have more than 300 employees 

b)     they must demonstrate at least a 50% reduction in gross receipts in the first or second quarter of this year compared to last year.

Usually, borrowers may receive a loan of up to 2.5 times their average total monthly payroll costs in the year prior to the loan, up to $2 million.

Those who take a second draw of PPP funds are also eligible for loan forgiveness for expenditures incurred before Jan. 1, 2021. 

Borrowers must still commit at least 60% of the money toward payroll expenses in order to get full forgiveness.

The proposed legislation also destines second-round funding for the smallest businesses: $25 billion for companies with less than 10 employees.

These two changes seek to keep funding away from firms that don’t otherwise fit the bill, as well as scammers. 

Borrowers would have until Dec. 31 to apply if the proposal is accepted.

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