How to get a PPP loan under new Biden administration rules

The Biden administration announced several changes to the Paycheck Protection Program this week, more strictly limiting which small businesses are eligible to receive forgivable loans through the federal rescue fund.

Starting Wednesday, businesses with fewer than 20 employees will have an exclusive two-week period to apply for loans. Bigger companies will be shut out of the program during that time frame, part of an effort to ensure the hardest-hit businesses can receive the aid they need.

"We will ensure every dollar is spent well," President Biden said Monday during an event announcing the program changes. "These changes will bring much-needed, long overdue help to small businesses who really need help staying open, maintaining jobs and making ends meet."

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Congress established the rescue fund in the early days of the pandemic with the passage of the March CARES Act. Lawmakers authorized another $284 billion in December to provide a second round of forgivable loans to small businesses, bringing the program's total funding value to $806 billion.

Over the course of roughly four months in 2020, the PPP distributed about $525 billion in forgivable loans to 5.2 million companies, saving an estimated 50 million jobs, according to the SBA. The program closed to new applicants at the end of July with roughly $38 billion remaining in the fund.

The program is expected to close to all borrowers on March 31.

Here's what you need to know about the program and the most-recent rule changes adopted by the Biden administration:

Which businesses are eligible? 

The program will be restricted to businesses with fewer than 20 employees beginning on Wednesday, Feb. 24 at 9 a.m. ET. The new rule is intended to ensure that the nation's smallest businesses receive the help.

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An administration official told reporters during a call on Sunday that while the program "delivered urgent relief to many businesses across the country" last year, the initial round "left too many minority-owned and mom-and-pop businesses out while larger, well-connected businesses got funds quickly."

Once the 14 days end, the original eligibility criteria will resume: Any business with fewer than 500 employees can apply for a first-time loan, and any business that already received a PPP loan can apply for a second if it employs fewer than 300 workers.

What period do the loans cover?

Businesses can choose to spend the funds over any period of time between 8 and 24 weeks. At least 60% of the money must be spent on maintaining payroll in order to receive full forgiveness.

The interest rate is still 1%.

If I already received a PPP loan, can I apply for a second one?

Businesses with 300 employees or fewer are eligible to receive a second loan, which will be capped at $2 million. Borrowers seeking a second forgivable loan also need to prove that they saw a 25% reduction in gross receipts during a quarter in 2020 compared with the same quarter in 2019.

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How much money can my business receive through the program? 

First-time borrowers are eligible to receive up to $10 million, while second-draw loans are capped at $2 million.

The amount of funding is calculated based on payroll from the past year. Borrowers can choose to use either 2019 or 2020 payroll figures in their calculations of the loan amount.

What are the forgiveness requirements?

Businesses are still required to spend at least 60% of the loan on maintaining payroll in order for the federal government to essentially transform the loan into a grant. The remaining 40% may go toward other eligible costs, including mortgage expenses, rent and utility payments.

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The $900 billion relief package that Congress passed in December also expands forgivable expenses to include personal protective equipment and other gear for worker safety, supplier costs; operations expenditures, and property damage costs stemming from "public disturbances" in 2020.