PPP Round Three and What You Need to Know

PPP opens to all lenders today – here’s is what you need to know

Within the Consolidated Appropriations Act (CAA), passed into law back on December 27, 2020, the Paycheck Protection Program (PPP) received authorization for a third-round funding for small businesses. The goal of the original Paycheck Protection Program was focused on helping to cover payroll and other operational costs for businesses – hopefully providing temporary financial support. This goal remains the primary focus of the PPP and the third-round funding introduces enhancements to better distribute and manage funds for small businesses.¹

The first round of PPP, which was created through the CARES act and included $349 billion in funding, provided little guidance for both lenders and businesses. With large corporations applying and receiving millions in funding, the initial program funding disappeared within two weeks, leaving thousands of small businesses struggling to keep their doors open. This forced an additional round of funding, with stricter eligibility rules and guidance.

^{Chart Source: Investopedia}

Unfortunately, the second round of funding expired in August of 2020, leaving thousands of businesses waiting for more funding. For some, the funding didn’t come soon enough, and for others it is coming just in time. This latest round which comes with the CAA also comes with updates and enhancements to key provisions relating to items such as loan maturity, deferral of loan payments and loan forgiveness.² It also comes with a $284 billion expansion for the PPP.

Who is eligible?

This third round will provide two types of loans which covers funding for those who have taken previous PPP loans and those who have not. For those businesses who previously took a PPP loan (either in the first or second round) and qualify, a second-draw loan can be taken up to $2 million. For those businesses which qualify and have never taken a PPP loan, a first-draw loan can be taken up to $10 million.^3,4

The second and third rounds of PPP have also come with detailed rules to protect the small businesses – of which the program was intended to support. Among many other guidelines and eligibility rules, the loan details establish that only small businesses with 500 or fewer (300 or fewer for those going for second-draw loans) can apply within round three. This guideline helps to focus the funds on the independent contractors, sole proprietors and self-employed businesses out there who really need the help.

Funding in this round of the PPP gradually became available starting January 11^th for first-draw PPP loans, other qualified businesses on January 15^th, and now funding is fully open to all lenders starting January 19^th, 2020. For those small business owners who would like to see if you qualify and how to start the application process, visiting the PPP section of SBA.gov is a great place to start!