Small businesses have spent nearly the entirety of the past year adjusting their business plans to survive the ever-changing climate of the COVID-19 pandemic. From lockdowns to new safety measures to decreased revenue, businesses have had to pivot and be creative in order to survive. These adjustments haven’t come without a significant cost or financial burden to small business owners. 

Community lenders, like Crown Bank, were essential in delivering payment protection program (PPP) loan requests, a $900 billion lending program launched by the federal government that rapidly overwhelmed larger national banks. According to the Small Business Administration (SBA), banks with less than $10 billion in assets have issued about 47 percent of total PPP loans through February 2021. This was due, in large part, to the sheer amount of PPP loan applications that came into any given bank. 

Partner with a Community Bank for Small Business PPP Loans

As many small businesses realized the difficulty in getting through to a banker at a larger financial institution during a global pandemic, they began to turn to local community lenders, with great success. 

Small businesses generally have substantially lower cash reserves compared to larger businesses and corporations. This meant that most small businesses were oftentimes in dire need of PPP funding to keep afloat. Luckily, community banks stepped in to ensure that small businesses didn’t fall through the cracks of the national banking ladder, but rather, received the funding they needed in a timely fashion.

Liz Mattingly, the owner of Lilia Flower Boutique, was one of many small businesses waiting for funding. After being approved for the loan by Wells Fargo in April 2020, she should have received their money within 10 days. Instead, Liz waited over two months only to hear that a glitch in the application process wouldn’t allow the bank to disperse the approved funds. Rather than go through the process yet again with Wells Fargo, she chose Crown Bank to handle her second application. Crown Bank filed her application on June 12, 2020. The application was approved 3 days later and she had the $19,905 deposited into her account on June 16, 2020.  

As the lockdowns continue, the SBA began accepting second draw PPP loan applications on January 13, 2021, and applications can be submitted until the March 31, 2021 deadline. 

Eligibility for the second draw PPP loans include:

• Those having previously received a first draw PPP loan that will or have used the full amount ONLY for authorized uses;
• Businesses with no more than 300 employees;
• Businesses with a minimum of 25 percent reduction in gross receipts between comparable quarters in 2019 and 2020

PPP loan forgiveness is also available for the second draw of PPP loans. Eligibility for full loan forgiveness during the 8- to 24-week covered period following loan disbursement includes:

• Employee and payroll levels remain as were required for the First Draw PPP loan;
• The loan amount is spent on payroll costs or other authorized expenses; 
• A minimum of 60 percent of the loan is spent on payroll

While the majority of the PPP loan program will remain the same from the first round, there are a few notable differences that may affect eligibility and funding amounts.

Eligibility 

Second draw loans are more targeted, meaning in addition to the first draw requirements, businesses will also need to show a 25 percent decrease in revenue in at least one financial quarter. Businesses are also required to have no more than 300 employees. Publicly traded companies will not be eligible for PPP loan distributions in the second draw. 

Funding

Second draw loans are capped at $2 million, rather than the $10 million amount for the first PPP loan distributions. Businesses in the food service industry or hospitality and (NAICS code 72) can borrow up to 3.5x their monthly payroll amount rather than the 2.5x approved in the first round.

PPP Loan Forgiveness

PPP loan forgiveness terms remain relatively unchanged in the second PPP loan distribution. Additional expenses have been qualified for small businesses to spend the remaining 40 percent of their loan, including software expenses, supplier costs, PPE and COVID-19 transmission protection items, and property damage caused by protests. 

Small business owners interested in applying for a second PPP loan, should gather the necessary documents before meeting with a banker to ensure the utmost efficiency in filing their application. Business owners should also consider working with small lenders for any PPP applications moving forward. According to a 2021 Small Business Credit Survey, small banks handled 48 percent of PPP loan applications and had the highest share of applicants receiving full funding, 78 percent over the 70 percent rate at larger banks.  

While banks prepare for another influx of PPP applications, Crown Bank will show, yet again, small lenders are always there to give their community businesses a head start in making ends meet by making the impossible possible. 

If you’re interested in learning more about how to apply for the next round of PPP loans and how Crown Bank can help you in achieving your financial goals, schedule a time to speak with a Crown Banker today.