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Getting a PPP Loan to Start Your Business

If you’re thinking about starting a business, you may be wondering if you can qualify for a Paycheck Protection Program (PPP) loan. Here’s what you need to know about this government-backed loan program and how it can help you get your business up and running.

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Overview

What is a PPP Loan?

A PPP loan is a loan that is guaranteed by the Small Business Administration (SBA) and is used to help small businesses keep their employees during the coronavirus pandemic.

The Paycheck Protection Program (PPP) loans are part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which was passed by Congress in March 2020. The PPP loans are 100% federally guaranteed and do not require collateral.

The maximum loan amount is $10 million, with interest rates not to exceed 4%. Loan terms are up to 10 years, but may be as short as 2 years if used for payroll costs. There are no prepayment penalties.

To be eligible for a PPP loan, businesses must have 500 or fewer employees and must have experienced a loss of revenue of 25% or more in any quarter in 2020 compared to the same quarter in 2019. Businesses that are considered “essential” may also be eligible for a PPP loan. These businesses include: health care providers, food service providers, transportation providers, and certain manufacturing and industrial companies.

How to Qualify for a PPP Loan

To be eligible for a PPP loan, you must:
-Be a small business, defined as a business with 500 employees or less
-Have been in operation on February 15, 2020
-Have experienced a 25% or greater reduction in revenue in any quarter of 2020 compared to the same quarter of 2019

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How to Apply for a PPP Loan

In order to apply for a Paycheck Protection Program (PPP) loan, you will need to work with a Small Business Administration (SBA) 7(a) lender.

The first step is to gather the required documentation, which includes:
-Your most recent federal tax return
-Your personal financial statement
-Bank statements or a current profit and loss statement
-Your business license

Once you have all of the required documentation, you will need to complete and submit the SBA Form 2483 (7(a) Loan Application) and the SBA Form 2483-SD (7(a) Loan Application- Standard Disaster). You can find these forms on the SBA website.

After your loan application has been submitted, the lender will review it and decide if you are eligible for the PPP loan. If you are approved, the lender will disburse the loan funds to your business.

What to Do if You’re Denied for a PPP Loan

Unfortunately, not everyone who applies for a PPP loan will be approved. If your loan is denied, don’t despair — there are other options available to you.

First, you can try reapplying for the loan with a different lender. Some lenders are more lenient than others, so it’s worth checking with multiple banks before giving up on the PPP altogether.

Another option is to apply for an SBA Economic Injury Disaster Loan (EIDL), which is available to small businesses and sole proprietorships that have suffered economic hardship as a result of the pandemic. These loans can be used to cover expenses like payroll, inventory, and other operating costs, and they come with interest rates as low as 3.75%.

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You can also look into otherSmall Business Administration (SBA) programs that may be a good fit for your business, such as the 7(a) loan program or the 504 loan program. These loans typically have longer repayment terms and lower interest rates than traditional bank loans, making them a good option for businesses that may not qualify for a PPP loan.

If you’re still having trouble finding financing, you can also reach out to your local chamber of commerce or Small Business Development Center (SBDC) for assistance. These organizations can help connect you with resources and programs that can help get your business up and running.

How to Use a PPP Loan

If you’re a small business owner, you may be wondering how to use a PPP loan. The Paycheck Protection Program (PPP) is a loan program that is part of the CARES Act, which was passed in March 2020 in response to the COVID-19 pandemic.

The PPP loan program provides small businesses with funds that can be used for payroll costs, rent, utilities, and mortgage interest. The loans are available through participating lenders and are 100% guaranteed by the Small Business Administration (SBA).

To use a PPP loan, you will need to work with a participating lender. You can find a list of participating lenders on the SBA website. Once you have found a lender that you would like to work with, you will need to complete an application and submit it to the lender.

Once your application has been approved, you will receive the funds from your PPP loan. You can then use these funds to cover your small business expenses. You will need to make sure that you use the funds for eligible expenses, as outlined in the CARES Act. Eligible expenses include payroll costs, rent, utilities, and mortgage interest.

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If you use the funds for eligible expenses and maintain your payroll during the covered period, then your loan may be forgiven. If you do not maintain your payroll or if you use the funds for ineligible expenses, then you will need to repay the loan with interest.

You can find more information about how to use a PPP loan on the SBA website or by talking to your lender.

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*This applies to Virginia residents too!

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