A second round of Payroll Protection Financing was recently approved by Congress and became available beginning January 15. Here is an overview of the basics and what has changed since the program was initiated in 2020.
- $284 billion has been allocated to and the program has been extended to March 31, 2021
- Second-draw loans are available for businesses with under 300 employees
- Businesses eligible for PPP loans has been expanded
- Forgiveness for loans under $150K have a new, simplified one-page application
- Eligible expenses for forgiveness have been expanded to include:
- payroll costs/other eligible expenses,
- group health insurance benefits (including life insurance, disability benefits, vision, and dental insurance)
- PPE purchases
- Borrowers are allowed to choose a covered period that is any period of time between eight and 24 weeks
- PPP funding includes dedicated set-asides for community lenders and business that operate in low-income areas
- Interest rates on PPP loans are non-compounding and non-adjustable
- Forgiven PPP loans are not taxable and forgiven expenses are tax-deductible
Only certain businesses are eligible to receive a PPP loan, and these specifications are different for first-time loan recipients and second-draw recipients.
To be eligible for a first-draw PPP loan:
- The business has fewer than 500 full-time, part-time, or seasonal employees.
- The business was operational before February 15, 2020 and remains operational.
To be eligible for a second-draw PPP loan:
- The business has fewer than 300 full-time, part-time, or seasonal employees; if it has have multiple locations, it may not have more than 300 employees per location.
- Must able to demonstrate a revenue reduction of at least 25% in the first, second, or third quarter of 2020 (when compared with the same quarter in 2019). Tax filings can be used to demonstrate this.
- You have used or will use the full amount of the first-draw PPP.
- Your business was operational before February 15, 2020 and remains operational.
Businesses eligible for first- and second-draw PPP loans include:
- Sole proprietors
- Independent contractors
- Self-employed individuals
- Certain non-profits (the new bill has expanded eligible businesses to include certain 501(c)(6) non-profit organizations)
- Seasonal employers; the new bill has clarified the definition of a seasonal business to be one that operates for at least a 12-week period, but no more than seven months within a year or earns no more than a third of gross receipts within a six-month period
- Faith-based organizations that have fewer than 150 employees