As part of the Coronavirus Aid, Relief and Economic Security Act (CARES Act), the federal government allocated nearly $1 billion towards the establishment of a loan program. Known as the Paycheck Protection Program (PPP), it’s helped countless small businesses stay afloat during periods of hardship. With that said, there are several myths about PPP loans that you shouldn’t believe. Below are five of the most common PPP loan myths.
5 Myths About Paycheck Protection Program (PPP) Loans
#1) No Longer Available
Many small business owners believe that PPP loans are no longer available. While the U.S. Small Business Administration (SBA) placed a deadline of August 8, 2020 for applications, it reopened the program on January 11, 2021. The new deadline has since been pushed back to May 31, 2021. Therefore, you can still apply for a PPP loan, assuming you act fast.
#2) Offered By the SBA
You can’t apply for a PPP loan directly from the SBA. The SBA simply manages the program; it’s not responsible for providing PPP loans. Rather, the SBA partners with banks. You can find a bank that offers PPP loans by visiting the SBA’s website here. As long as you meet the necessary requirements, you shouldn’t have trouble obtaining a PPP loan.
#3) Must Be Paid Back
You don’t have to necessarily pay back a PPP loan. Depending on how you use it, some or all of the loan may be forgiven. You can use a PPP loan to cover payroll expenses, for instance. As the name suggests, PPP loans offer forgiveness for payroll expenses. You can also use a PPP loan to cover leasing expenses.
#4) Can’t Use It To Pay Yourself
It’s a little-known fact that you can use a PPP loan to pay yourself — and you won’t have to pay it back. Many owners of sole proprietorships, as well as self-employed freelancers, have used PPP loans to pay themselves. The SBA will forgive self-pay expenses such as this as long you follow the eligibility guidelines. For more information about eligibility requirements, contact the bank from which are you are applying for a PPP loan.
#5) Only Available Once
Another common myth is that you can only obtain a PPP loan once. The SBA, however, allows for both First Draw PPP loans and Second Draw PPP loans. A Second Draw PPP loan is a second PPP loan. They have similar requirements as First Draw PPP loans. If you’ve already used all of the money from a First Draw PPP loan, you may be eligible for a Second Draw PPP loan.
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