PPP is a SBA-backed loan program specifically developed for small business owners. It helped them to keep their employees and support staff on the job during the deadly Coronavirus outbreak. Unfortunately, SBA discontinued this program on May 31, 2021. However, the existing browsers can still apply for PPP loan forgiveness.
Who can apply for PPP loan forgiveness? Small business owners can only apply for it if they have used the funds for eligible payroll costs. You could apply for PPP loan forgiveness if the funds were used for paying business mortgage interest fees after Chime’s approval.
Chime checks all the eligibility criteria before approving the PPP loan applications. The requested loan amount will be deposited in your Chime account if you qualify for this business loan. There needs to be more clarity about how PPP loans work and who is eligible.
So, let’s get to know more about the Paycheck Protection Program, who and how can apply for it:
Is Chime Currently Accepting PPP Loan Deposits?
Chime is offering small business owners something other than the Paycheck Protection Program loans. It is rejecting all business transactions, including loan approval and deposit. Hence, your application will be rejected and returned to the Internal Revenue Service.
Why did Chime stop accepting the PPP loan deposits? The company stated that this loan was only for business transactions, not personal use. Chime made this statement on Twitter to inform users why they reject PPP loans.
Paycheck Protection Program – What Is It & Its Different Types?
The Paycheck Protection Program, or PPP, is a low-interest private loan designed to cover small-scale companies’ payroll and other business expenditures. This program provides small enterprises with funds to pay their associates up to 8 weeks of payroll costs.
PPP can also be used to pay rent and utility bills. It helps millions of Americans who are employed in small-scale companies. The Small Business Administration authorised over $659 billion to these businesses to prevent employee turnover.
Along with small businesses, non-profit organisations and tribal businesses are eligible for PPP. Self-employed individuals and independent contractors can apply for this business program. Since Chime isn’t accepting PPP loans, try looking for alternative banks to get it.
There are two types of Protection Protection Program loans you can apply for, these are:
First Draw PPP Loans
A First Draw PPP loan is for individuals who have never received or applied for a loan through the PPP. Small Business Administration lets you use the funds from this type of PPP loan only for limited purposes. You can utilise the money to:
- Cover utilities
- Rent payments
- Payroll cost funding
- Mortgage interest payments
- Pay the uninsured property damage that occurred in 2020
- Cover supplier costs and operational expenses
How Does the SBA-Backed First Draw PPP Loan Work?
You must know how the First Draw PPP loan works before applying for it. There is no need to have valuable possessions or a personal guarantee to get this loan. The interest rate (1%) is quite low in this PPP loan type.
Borrowers who have issued the First Draw PPP loan after June 5, 2020, get 5 years to repay it. Moreover, you can apply for loan forgiveness even after getting this PPP loan.
However, the monthly loan payments will be deferred until SBA transfers the loan forgiveness amount to the lender.
What if you don’t apply for the PPP loan forgiveness? Your First Draw PPP loan payments will be deferred for 10 months, and you must repay it once the loan forgiveness period ends. No additional fees or charges must be paid after applying for this PPP loan.
How Much Can You Borrow with a First Draw PPP Loan?
You must be wondering how much you can borrow from the bank with this type of PPP loan. The amount varies based on the number of employees working in your organisation. Besides, SBA considers your business size when determining the PPP loan amount.
The maximum First Draw PPP loan amount is $10 million. The Small Business Administration confirmed that the average amount is $107,000 for this PPP loan. Over 86.5% of borrowers have taken less than $150,000 through the First Draw PPP loan.
Second Draw PPP Loans
This PPP loan is exactly the opposite of the First Draw PPP loans. An entrepreneur can apply for the Second Draw PPP loan even if they have received a PPP loan before.
Second Draw PPP loans can be used for the same purposes as the first PPP loan type. The interest rate of Second Draw PPP loans is also the same as the First Draw PPP loans.
How Much Can You Borrow with Second Draw PPP Loans?
Understanding the loan amount for this PPP loan can be complicated for some borrowers. You must first calculate your business’s payroll cost before applying for the Second Draw PPP loan.
Business owners can receive the loan amount based on their payroll costs. You can borrow around $2 million with the Second Draw PPP loan.
You can apply for this type of PPP loan on Chime and other banks if your lender is from the following organisations:
- SEDCO
- FountainHead
- DreamSpring
- Harvest Small Business Finance
- Benworth
Do You Need to Repay the PPP Loans?
Well, the obvious answer to this question is “Yes” because all loans need to be repaid. Borrowers must repay the First and Second Draw PPP loans within the given time. However, you must apply for loan forgiveness if you can’t repay the outstanding loan amount. It will help you to write off the PPP loans easily.
How Can Small Business Owners Apply for PPP Loan Forgiveness?
Small business owners can only apply for PPP loan forgiveness through their lender. Here is what Chime and other financial institutions check before approving the PPP loan forgiveness:
For First Draw PPP Loans:
Based on the SBA rules, entrepreneurs can apply for loan forgiveness within 8-24 weeks of applying for the First Draw PPP loan. You can qualify for it if you have:
- Maintained the employee and compensation levels properly
- Used the loan money for payroll and other business-related expenses
- Spend at least 60% of the PPP loan fund to cover payroll costs
For Second Draw PPP Loans:
The eligibility criteria for the Second Draw PPP loan forgiveness are identical to the First Draw PPP loans. Borrowers can apply for it within 8-24 weeks of Chime Bank’s
Approval. They will only qualify for full loan forgiveness if they have performed the following duties:
- Spent at least 60% of the Second Draw PPP loan money for paying their associates
- Used the loan fund to pay mortgage interest, rent, utilities and other approved costs.
- Managed to successfully maintain the employee and compensation levels during the loan disbursement period
Small business operators can apply for the First and Second Draw PPP loan forgiveness at any time within 8-24 weeks. However, Chime advises the borrowers to apply for full loan forgiveness within 10 months of approval.
The bank otherwise won’t keep your monthly loan payments on hold. You will ultimately need to start repaying the PPP loan even after applying for loan forgiveness. So, act fast if you don’t want the lenders to seize your valuable possessions like cars or houses.
Who Can Apply for the PPP Loan at Chime or Other Financial Institutions?
Small businesses with 500 employees or more can apply for First Draw PPP loans. Besides, companies with a NAICS code start with 72 and have less than 500 workers in each office location.
The eligibility criteria for the Second Draw PPP loans differ from those for the First Draw PPP loans. Here, business owners must apply for the First Draw PPP loan to get the Second Draw PPP loan. Borrowers can only use the fund money for authorised purposes and not for personal uses.
Your company must have 300 or fewer employees to get the Second Draw PPP loan approval. However, you won’t qualify for the PPP loans if you have failed to repay the federal loans. Small businesses located in a foreign country don’t qualify for this loan.
Are you engaged in discriminatory hiring practices? Does your small business promote religion? Chime won’t approve your PPP loan approval. Government-owned and passive businesses are also not eligible for this loan. Businesses that run illegal activities or lend products or services to consumers can’t apply for PPP loans.
