PPP Round 2 and Simplified Forgiveness Application
The Consolidated Appropriations Act that was recently signed into law includes a second round of the Paycheck Protection Program (PPP) and a simplified forgiveness application process for the first round of PPP loans. Please note that the below details include what we know right now. The Small Business Administration has 10 days to provide further guidance and regulations. As details emerge, Easytrack will continue to provide updates.
Paycheck Protection Program Round 2 1) Available to eligible first-time qualified borrowers and borrowers who previously received a PPP loan 2) Eligible businesses must meet the following standards: a) Employ no more than 300 employees b) Have used the entire amount of their first PPP loan or will use such amounts c) Had gross receipts during Q1, Q2, or Q3 2020 that were at least 25% less than the gross receipts from the same quarter in 2019 3) Covered Period a) Borrowers will be able to choose the length of their covered period as long as it is at least 8 weeks and no longer than 24 weeks 4) Use of Funds a) The bill expands the types of expenses for which PPP funds can be used. This expansion applies to existing PPP loans (except if a business has already obtained forgiveness) AND new loans. b) In addition to the payroll, rent, covered mortgage interest, and utilities expenses that were included in the original PPP, round 2 also allows loans to be used for the following expenses: - Operations Expenditures - Property Damage Costs - Supplier Costs - Worker Protection Expenditures *Contact your CPA if you have questions on the specifics of the qualified expenses listed above 5) Maximum Loan Amounts a) Borrowers applying for the second round of PPP loans have the option of how to calculate their 2.5x average monthly payroll - Multiplying the average monthly payroll for the one-year period prior to the date on which the loan is made by 2.5 - Multiplying the average monthly payroll for calendar year 2019 by 2.5 b) Borrowers in the hospitality industry (NAICS code starting with 72 - typically restaurants and hotels) are permitted to use a 3.5x multiplier of their average monthly payroll when calculating their maximum loan amount 6) Tax Treatment a) PPP loans will NOT be treated as taxable income. Additionally, expenses paid with the proceeds of a PPP loan that is forgiven are now tax-deductible. This applies to existing loans AND new loans. 7) 501(c)(6) Eligibility a) 501(c)(6) not-for-profit organizations will be eligible to apply for and receive a loan 8) Treatment of Economic Injury Disaster Loans (EIDL) Advances a) EIDL Advances will no longer reduce PPP loan forgiveness b) The SBA has indicated that borrowers that already received forgiveness and had their EIDL Advance deducted from this forgiveness may be able to amend their forgiveness applications. Further guidance on this is expected. c) This applies to existing loans AND new loans Forgiveness Applications for Loans Under $150,000 1) The forgiveness application for loans under $150,000 will be simplified to a one-page certification 2) This application is not yet available. Easytrack will continue to send updates as further details are released.