Just in time for the holidays, Congress passed a new $900 billion stimulus bill in response to the ongoing COVID-19 pandemic. Of particular note is the $284 billion set aside for a second round of funding for the popular Paycheck Protection Program (PPP), which provided forgivable Small Business Administration (SBA) loans to struggling small businesses and nonprofits.
The first round of PPP loans was a lifesaver for many businesses, but its rollout had issues and the forgiveness process was altered to make it easier for borrowers. This new bill gives businesses the ability to take a “second draw” of PPP funds and includes a range of improvements to the program, so read on for the basics of what you need to know.
Eligibility
- Small businesses that have no more than 300 employees and can demonstrate at least a 25% reduction in gross revenues between comparable quarters in 2019 and 2020 are eligible for PPP funds.
- PPP eligibility is expanded for certain 501(c)(6) nonprofits and Destination Marketing Organizations with 300 or fewer employees that do not receive more than 15% of their revenue from lobbying, and the program includes set-asides to support first-time borrowers with 10 or fewer employees, second-time borrowers with 10 or fewer employees, first-time PPP borrowers who have been made newly eligible and second-time returning PPP borrowers.
- Returning businesses must have used or will use the full amount of their first loan.
Loan Size & Forgiveness
- Maximum loan size is 2.5 times average monthly payroll costs, up to $2 million (3.5 times average monthly payroll costs for Accommodation and Food Services businesses).
- Borrowers receive full forgiveness by spending at least 60% of PPP second draw loan on payroll costs over a time period of either eight weeks or 24 weeks.
Improvements
- PPP allowable and forgivable expenses are expanded to include supplier costs on existing contracts and purchase orders, including costs for perishable goods, worker protective equipment and adaptive measures, and technology operations expenditures. Borrowers can include additional group insurance payments when calculating payroll costs, including plans such as vision, dental, disability and life insurance.
- Borrowers can select their loan forgiveness covered period of either eight weeks or 24 weeks.
- The forgiveness application process is simplified for smaller loans of up to $150,000 and increases SBA’s ability to audit and review forgiven loans.
- Borrowers who returned all or part of their loans can reapply for the maximum amount applicable. Lenders can also recalculate loan amounts due to changes in regulations regardless of whether SBA Form 1502 has been submitted.
- Measures for transparency and accountability in the PPP program have been increased.
Just as the first round was, this “second draw” for PPP funds will provide badly needed assistance to hard-hit businesses and nonprofit entities, but there is no time to wait in applying for the loan, and owners must clearly understand the program to achieve full forgiveness. McClintock & Associates is here to answer any questions related to this program and other pandemic-relief measures, so feel free to contact our experts.
