Small Businesses Can Now Apply for the Third Round of PPP Loans

The latest government stimulus package, the Consolidated Appropriations Act, 2021, passed at the end of December, includes a third round of Paycheck Protection Program (PPP) that will be available this week. One significant update is that this round of PPP will allow businesses who have previously received a PPP loan to apply again for a second draw of up to $2 million, as long as they’ve used the entirety of their first loan.

[ Read: Best Small Business Loans for 2021

The Small Business Administration has also released new guidelines on how the third round of PPP funding will be dispersed. The new restrictions aim at funding even smaller businesses and a commitment to prioritize underserved and minority-owned businesses. There is a total of 284.5 billion available, including $35 billion for first-time loans. PPP funding will be available for application through March 31st or until funding has been exhausted.

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In this article

    Would my small business qualify for the Paycheck Protection Program?  

    First-time borrowers can apply for a loan up to $10 million if you fall within the SBA’s eligibility requirements. Small businesses will qualify if they fall under the following:

    • Businesses with under 500 employees that are eligible for other SBA 7(a) loans
    • Nonprofit organizations and churches and 501(c)(6) organizations
    • Independently owned franchises 
    • Accommodation and food service operations with fewer than 300 employees per physical location
    • Housing cooperatives, direct marketing organizations, 
    • Independent contractors and sole proprietors

    On January 13th, applications open for second-draw PPP loans — meaning those who have already received a PPP loan can apply again for a loan of $2 million or less. Second-draw applicants must meet the following requirements:

    • Must have under 300 employees
    • If you want a loan of $150,000 or more, you must prove there has been at least a 25% revenue drop between the 4th quarter in 2019 and the 4th quarter in 2020
    • Used (or will soon use) the full amount of the first PPP loan

    Who doesn’t qualify for the paycheck protection program? 

    The eligibility requirements for a PPP loan are similar to the first two rounds. The following may make a business ineligible for a PPP loan:

    • More than 500 employees (per physical location depending on industry)
    • Publicly traded companies and businesses controlled (directly or indirectly) by the president, vice president, congress members and head of executive departments.
    • Engaged in political or lobbying activities
    • Received a grant under the Shuttered Venue Operator Grant program

    Can PPP loan forgiveness affect my taxes?

    PPP loans are not included in your business’s taxable income. With a forgivable PPP loan, the expenses you used the loan for will be considered tax-deductible. A forgiven PPP loan is completely tax-exempt and is not considered taxable income.

    How do I apply?  

    For the first two days of the PPP application window, the SBA has said it will be open exclusively to applications from community financial institutions that serve veteran, minority and women-owned businesses.

    Like the first two rounds of PPP lending, you can apply through any SBA 7(a) lender or any participating federally insured depository institution, federally insured credit union and Farm Credit System institution. You can download application forms from a participating lender or on the SBA website. The application deadline is March 31, 2021, though funds could be used up before then.

    We welcome your feedback on this article. Contact us at inquiries@thesimpledollar.com with comments or questions.

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    More Resources

    At The Simple Dollar, we have been following COVID-19 since the start. Check out the articles below for resources and the latest news on financial relief from the coronavirus.

    Danika Miller

    Personal Finance Reporter

    Danika Miller is a personal finance reporter at The Simple Dollar who specializes in banking, savings, budgeting, home insurance, and auto insurance. Her reporting has also been featured at CreditCards.com, Reviews.com, and elsewhere.

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    • Andrea Perez
      Andrea Perez
      Personal Finance Editor

      Andrea Perez is an editor at The Simple Dollar who leads our news and opinion coverage. She specializes in financial policy, banking, and investing.