PPP Loans - The NEW Details


The SBA released additional information on the next round of PPP loans, including some easy to read one-pagers for first and second draw PPP loans.


Availability

The SBA has released the following timeline:


January 11th – Community Financial Institutions ONLY will accept First Draw PPP loan applications


January 13th – Community Financial Institutions ONLY will accept Second Draw PPP loan applications


January 18th - Expected to be open for all other eligible financial institutions


Check with your lender for their specific process.


Key PPP Changes within the new legislation

- PPP forgiveness is NOT taxable; expenses used for PPP ARE deductible – consult with your tax advisor

- Additional eligible expenses now qualify for forgiveness – payroll still must be at least 60% of expenses

- Payroll costs to calculate the PPP loan amount now include employer payments for group life, disability, vision, and dental insurance payments

- Borrowers may select the end of their covered period anytime between 8 – 24 weeks from receipt of the loan

- EIDL advances are not taxable and will NOT reduce PPP forgiveness. Any borrower that has filed for forgiveness and the EIDL advance reduced the forgiveness will receive this advance back plus interest through their lender.

- 501c(6) entities are eligible except sports teams

- Borrowers can receive both the PPP loan and the Employee Retention Credit (this is tricky - I will cover this in the future.)

- Partnerships that did not include partner compensation in the initial PPP request can reapply by March 31st.

This is key - all of these changes are retroactive to the original CARES Act (March 2020.) Borrowers can amend their original application to request an increased loan amount for the first round of PPP if they would now be eligible for a higher amount (subject to funds availability.)

PPP 1st Draw Loans

  • If you did not apply for a first-round PPP loan, you can now apply.

  • If you applied in Round 1 and returned some or all of the funds, you can reapply.

  • In some instances, businesses can request to modify their First Loan PPP if they did not receive the full amount.

  • PPP 2nd loan draw revenue reduction requirements do NOT apply

  • Eligible for businesses with <500 employees.

Top-line-Overview-of-First-Draw-PPP
.pdf
Download PDF • 149KB

PPP 2nd Draw Loans

Requirements:

  • Employs no more than 300 employees

  • Has or will use the full amount of their first PPP loan

  • Business must be in operation on or after February 15, 2020

  • Closed businesses may not receive a PPP loan

  • Business had gross receipts during the first, second, third, or fourth quarter in 2020 that demonstrate not less than a 25 percent reduction from the gross receipts of the entity during the same quarter in 2019 (ie Q1 2020 vs. Q1 2019, Q2 2020 vs. Q2 2019, etc.)

Top-line-Overview-of-Second-Draw-PPP
.pdf
Download PDF • 130KB

If tax returns show a 25% drop in annual revenue or more in 2020 vs. 2019, this will be sufficient to support the revenue decline.


Loans >$150,000 – must submit documentation supporting the 25% reduction.

Loans <$150,000 – does not have to submit documentation to apply but must provide when applying for forgiveness.

The loan amount is calculated as 2.5X the average monthly payroll costs for the calendar year 2019, the calendar year 2020, or the 12 months immediately preceding the date of the loan. If your company has a NAICS classification starting with 72 (Restaurants) then the multiplier increases to 3.5X.

Schedule C taxpayers can use the 2019 or 2020 line 31 net profit to calculate their 2nd round loan amount.


Businesses can apply for only one 2nd draw loan; Deadline to apply March 31, 2021.


For both 1st and 2nd Draw PPP Loans -

The borrower must certify that current economic uncertainty makes the loan request necessary to support ongoing operations. The SBA will not question a borrower’s good faith certification that a loan is “necessary” for loans under $150,000. And all borrowers of less than $2,000,000 will automatically be deemed to have made the certification in good faith. However, other government and non-government agencies might be interested, and this loan information will be public.


Later this week, I will discuss changes to the EIDL program, the employee retention credit, and the Shuttered venues grant program.

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