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New Stimulus Bill Includes Second Round of PPP Loans

As you’ve probably already heard, Congress passed the Consolidated Appropriations Act, 2021, (the “Relief Act”), which includes a relief package consisting of $900 billion in aid to small businesses and individuals impacted by COVID-19 on December 22.

We want to make sure you have access to forgivable loans if you are eligible. Our team will start applying for the 2nd PPP loan as soon possible.  As of yet, we haven’t found any banks accepting applications.  We’ll continue to sit on the edge of our seats awaiting the big day. 

PPP Eligibility Requirements for Borrowers to Receive a 2nd PPP Loan

Pursuant to Sec. 311, PPP Second Draw Loans, previous PPP loan borrowers can apply for an additional loan of up to $2 million, if they meet the following requirements:

  • Have 300 or fewer employees
  • Have used or will use all of the proceeds from their first PPP loan
  • Had a 25% or greater reduction of “gross receipts” when comparing any quarter in 2020 to the same quarter in 2019

In addition, the following stipulations apply to this round of PPP loans:

  • The PPP-2 loans cannot exceed $2 million
  • The loan is based on 2.5 x average monthly payroll costs in 1-year prior to loan or calendar year 2019
  • For Borrowers with NAICS codes starting with 72 (i.e., hotels and restaurants), the loan is based on 3.5 x average monthly payroll costs
  • Similar to the first round of PPP loans, eligible spending must comprise at least 60% on payroll costs (compensation, health, retirement and state and local payroll taxes) over a Covered Period of either 8 or 24 weeks. See below for additional eligible costs.
  • New PPP loans will be available through March 31, 2021

What does this mean for your company?  If you qualified for the first round of PPP funds,  you may want to consider applying for the second round.  You do need to have a decrease in revenue when comparing quarters ie. your revenue or sales has been affected by COVID.  Second draw loans are forgivable but must be spent 60% on payroll costs.  

What if I’m a new business?

A business is considered a new business as long as it wasn’t in business before February 2019.  These businesses will figure their monthly payroll by taking the total payroll over their entire time they have been in business divided by the number of months in operation. 

Similar to the last round of PPP, there is still lack of guidance on how loans will be calculated.  What we do know is that there is an expansion of PPP eligible expenses.  You will now be able to include operating expenses like software and accounting, property damage, purchase orders for goods not yet received, and worker protection expenses related to COVID19.  The new expenses will be eligible to apply to all PPP loans, including the first round.  

What if I was approved but didn’t accept my funding on round one?

If you previously applied for a PPP loan and were approved but did not accept the funds or returned a portion of your initial loan, you may be eligible for the previous amount you didn’t accept, but only if you didn’t apply for forgiveness.      

How do I apply?

Ask your bank or CPA how they can help you complete the PPP application and its requirements.  During the first round of PPP we found very similar requirements at each bank.  

Are PPP loans taxable?

PPP loans are no longer included as taxable income.  Similarly, the expenses that are paid using PPP funds are tax-deductible.  This includes new and previous PPP funds now that the guidance from the Treasury and IRS has been reversed.  

Check out this cool article on the SBA website: Paycheck Protection Program (PPP) Myth vs. Fact

The PPP information included in this blog is meant to be used at your discretion.  Profit Matters is not responsible for updating this information.  We are not providing legal or tax advice.  Please refer directly to the IRS guidance or contact your attorney for legal assistance regarding PPP round two. 

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