NEW YORK — For Nancy Sinoway, a second coronavirus relief loan would increase the chances that her dressmaking business will survive.
“I could use it for marketing, for new samples. I could use it as a lifeline,” says Sinoway, who designs and makes dresses for occasions like weddings and proms. She was flooded with order cancellations starting in early March as the virus spread and large gatherings and events were abandoned.
Sinoway got a Paycheck Protection Program loan last May and used it to pay her three employees. But the loan money fell far short of what she needed to maintain her Port Washington, N.Y., shop. She was forced to close it and move the business into her home.
Millions of business owners like Sinoway are about to get help. The Small Business Administration and the Treasury Department are preparing to revive the PPP five months after its first two rounds of funding ended.
In the latest round, businesses that received loans last year will be able to borrow up to $2 million as long as they have no more than 300 employees and suffered at least a 25% drop in quarterly revenue. First-time borrowers with no more than 500 workers can borrow up to $10 million.
The loans, which can be forgiven, will have five-year terms and carry an interest rate of 1%.
The SBA will initially accept only applications submitted by community financial institutions, or CFIs, lenders whose customers are minority-owned and economically disadvantaged businesses. Starting Monday, applications for first-time borrowers submitted by these lenders will be accepted, followed by applications for second loans on Wednesday. SBA said it would begin accepting applications from all its lenders within a few days of that initial period reserved for CFIs.
As with the first two rounds of the PPP, applications must be submitted online at banks and other SBA-approved lenders. All applications must be submitted and approved by March 31. Loan amounts are calculated using a company’s payroll expenses; businesses can use either their 2019 or 2020 payroll to compute how much they can ask for.
Companies will have 24 weeks from the date they receive a loan to use the money. While 60% of the proceeds must be used for payroll in order for loans to be forgiven, companies can use the rest for employee health benefits, mortgage interest, rent, utilities and expenses that are essential to business operations.
The PPP is being restarted under the coronavirus relief bill Congress approved in late December, providing for $284 billion in new loans. The first two rounds, which began April 3 and ended Aug. 8, gave out more than 5.2 million loans worth $525 billion.
But for many businesses, including restaurants, gyms and retailers that depend on people gathering in large numbers or in close quarters, the money was nowhere near enough as the pandemic continued longer than anyone expected. It’s estimated that well over 100,000 small U.S. businesses have failed since the outbreak began.
Moreover, many companies weren’t able to get loans, including newly formed businesses and those whose financial records didn’t meet bank requirements. Many businesses applied to multiple banks, often because they couldn’t get a response to their applications and subsequent inquiries — and many of these business owners gave up in frustration or ran out of time.