Coronavirus relief legislation passed in 2020 included an additional $284 billion for Paycheck Protection Program (PPP) loans to help small businesses pay employees and stay open. That second round of funding is now available. Some eligibility requirements have changed, and forgiveness rules have been eased a bit.
In addition to first-time applicants, some businesses that have already received PPP funds are eligible to apply. Following are basic eligibility requirements for this second round of funds:
- The business must have no more than 300 employees (previously 500).
- There must be at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020.
- Amounts applied for cannot exceed $2 million. The amount awarded will be based on the applicant’s payroll.
- If PPP funds were received in the first round, the full amount of qualifying expenses must have been used or there must be a plan in place that demonstrates they will be. Businesses that qualified for first round funds but have seen recovery may have to certify that the loan is necessary. Some first-round borrowers may qualify to request modification of their first- round loan amount.
The initial PPP was intended to cover expenses for an eight-week period but that was eventually extended for up to 24 weeks. Fund recipients can now select a covered period between eight and 24 weeks, based on specific business needs. Loan funds were initially forgivable if at least 75% of funds were used for payroll but now that’s 60%. Other expenses to which PPP funds can be applied include:
- Mortgage interest
- Worker protection and facility modification costs to comply with COVID-19 guidelines
- Property damage costs related to damage, vandalism, or looting due to public disturbances and not covered by insurance or other compensation
- Supplier expenses that are essential to the business’s operations at the time of purchase
- Certain operating expenses
Most recent rules provide for automatic forgiveness of loans up to $150,000 with the business owner’s self-certification that forgiveness criteria have been met. Businesses that don’t qualify for forgiveness of all or part of the loan can repay the loan over five years at 1% interest. Additionally, businesses can now claim a deduction on qualifying expenses that were paid with PPP funds. The program has been expanded to include some nonprofits and other organizations.
Banks, credit unions and some nonbank lenders can accept applications for PPP funds and applicants do not have to have an existing banking relationship with an institution to apply. March 31, 2021 is the deadline to apply for Round 2 funding.
Details may change, so it’s important to verify the information included here with your CPA or financial professional and how it applies to your situation. Visit the US Small Business Administration website for all the specifics. As always, if you need any help navigating this or any tax-related aspect of your business, feel free to reach out to me.