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.
Updates from what we have learned since our original article on December 30th are underlined.
Paycheck Protection Program Round 2
1) A PPP loan is available to eligible first-time qualified borrowers and borrowers who previously received a PPP loan
2) Eligible businesses who are applying for a 2nd round of funding 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 prior to receiving the funds for the 2nd round
- An application for a second loan can be submitted in advance of all of the funds from the first loan being used
c) Had gross receipts during any quarter of 2020 that were at least 25% less than the gross receipts from the same quarter in 2019
- Businesses that were in operation for the entirety of 2019 can simply compare their entire year gross receipts to the gross receipts for 2020 rather than breaking them down for an individual quarter
- Gross receipts do not need to be provided at the time of the application but they will need to be provided before a business receives the loan funds
d) Businesses that were not in operation on February 15, 2020 are not eligible
3) Businesses that are applying for the first time are not required to meet the above eligibility standards
a) Talk to your CPA and/or visit the SBA’s website dedicated to the PPP for more information on applying for a first-time loan
4) 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
5) 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
6) 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
c) Businesses can determine their average monthly payroll costs based on any 365-day period between January 1, 2019 and December 31, 2020
7) 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.
8) 501(c)(6) Eligibility
a) 501(c)(6) not-for-profit organizations will be eligible to apply for and receive a loan
9) 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
10) Businesses that returned all or part of their initial loan or that did not accept the full amount may reapply or request an increase for their first-round loan
11) The deadline to apply for a loan is March 31, 2021
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.