MONTGOMERY, Ala. (WSFA) - Small businesses hit hardest by the pandemic could soon receive a forgivable loan under the federal Paycheck Protection Program. The latest congressional COVID-19 relief package allocated money for a second round of PPP loans to help businesses make payroll.
Alabama Bankers Association President and CEO Scott Latham says banks are ramping up to process loan applications and disperse funds.
“This is a lifeline out there that can help and so we encourage them not to be afraid to seek it out,” Latham explained.
PPP loan applications opened this week for small and minority-owned businesses and community banks.
“The early opportunity for these institutions to make loans beginning yesterday is to make sure that we reach underserved communities, minority communities and low income communities,” he stated.
The application process is expected to open to all indexes in a number of days.
You can read more about PPP loans and loan forgiveness here.
Latham says any business who needs the extra help should contact their bank. In order to apply they would need to present payroll records, 941 forms, and documentation to prove they were in business on Feb. 15, 2020.
“Simply go in, sit down and talk about the need, as they would with most any loan with the banker The banker is able from the information provided to upload a loan application to the SBA,” Latham added. “It’s a fairly simple process.”
At this point, the Small Business Administration will not make same day approvals.
“We hope that means possibly some next day, or some day after that approvals will be made,” he said of the SBA, which will greenlight banks to disperse the funds.
Sixty percent of the loan must be used on payroll expenses. If certain criteria is met, it could be fully forgiven.
“The new round also includes a slightly expanded use of those funds. Again, more than half has to be spent on payroll expenses, but they have actually rolled in some additional categories that the funds may be used for.”
Businesses who received a loan in 2020 can reapply. Latham doesn’t expect to encounter the same issues that plagued the system nationally during the first rollout.
“The first round was much like building an airplane while it was in flight, we were getting guidance as we went. Thankfully enough time has lapsed since the PPP loan program closed in the fall for them to prepare, if you will, in a better way for this next round.”
In 2020, Alabama banks issued nearly 70,000 PPP loans totaling more than $6.2 million. The average loan amount was more than $89,000 for a business with 10 employees.
“We hope that that small businesses will be encouraged to seek this out,” Latham added. “This is direct help, again, hopefully forgiven in most every case for businesses to really help get themselves reestablished - back to the tables and the payrolls of people who work in these businesses, who need this help and who need those jobs.”