What Businesses Should Know About Round 2 PPP Funding

On January 19, 2020 the U.S. Small Business Administration (SBA) will fully re-open its Paycheck Protection Program (PPP) Portal to PPP eligible lenders for First and Second Draw applications for PPP loans. Eligibility to apply for a PPP loan varies depending on whether the business is a first or second time borrower. This article is a summary, but please refer to the SBA rules and guidelines for additional information.

• General Guidelines for First-time borrowers.

  • Did not receive a PPP loan before August 8, 2020

  • Less than 500 employees

  • Business must have been in operation as of February 15, 2020.

  • First loan can be up to 2.5 times the business’ average monthly payroll costs, up to a $10 million loan maximum.

• General Guidelines for Second-time borrowers.

  • Must have spent or expect to spend the full amount of their first PPP loan before receiving funding for the second loan.

  • Less than 300 employees.

  • Second loan can be up to 2.5 times the business’ average monthly payroll costs, up to a $2 million loan maximum.

  • Must show that business revenue declined by at least 25% in any quarter in 2020 compared to the same quarter in 2019.

  • Does not matter whether business applied for Forgiveness with first loan.

There is greater flexibility in how the PPP loan may be used and still be fully forgiven. For any PPP loan to be fully forgiven, at least 60% of the money must be used for payroll expenses. But the remaining 40% or less may be used to cover an even broader swath of business expenses than was the case during the initial rounds of PPP lending. In addition to mortgage interest, rent and utility payments, the loan now may be used to cover the costs of personal protective equipment and other expenses incurred to meet COVID restrictions, as well as certain operations, property damage and supplier costs.

The forgiveness process will be simpler for many small businesses. Those businesses that borrowed $150,000 or less will simply need to submit a one-page certification that includes the number of employees the business retained as a result of the loan, an estimate of how much of the loan was spent on payroll and the total loan amount, and an attestation that the information is accurate to be forgiven. In addition, the PPP loans will be tax-deductible for recipients if they're used for authorized purposes regardless of whether those expenses were largely paid for by the tax-free loan.

What does this mean for small business who would like to apply for these funds:

• Check whether your lender expects to participate in this new PPP round and request their updated application. Remember, it is ok (and I would even say encouraged) to reach out to multiple lenders as they will have varying processes.

• Contact your accountant, attorney, or other trusted advisors to sort through your eligibility and financials that will be needed for an application. Do your best to have as much as possible completed in advance of the date applications open.

As you face the day to day questions of balancing business concerns, the law, and health and safety, the firm is here to assist in any way we can.