PPP 2.0 – Covid relief funds

The new and improved Paycheck Protection Program (PPP) officially re-opened this week with new guidance issued by the U.S. Small Business Administration (SBA) and the United States Treasury. First-time and second-time borrowers are now eligible to apply for forgivable loans under specific guidelines.

It’s time to apply now, and as soon as possible. While the application portal will remain until March 31, 2021, the funds may well be used up quickly like last time.

There are two options, based on whether you received a loan the first time around or not.

First Draw PPP Loans – First Time PPP Applicants

If you didn’t get help during the first wave of PPP loans, you can apply under the “First Draw” loan rules. These loans can be used to help fund payroll costs, mortgage interest, rent, utilities, and worker protection costs related to COVID-19. First Draw PPP Loans made to eligible borrowers qualify for full loan forgiveness if during the 8-to-24-week covered period following loan disbursement:

  • Employee and compensation levels are maintained.
  • The loan proceeds are spent on payroll costs and other eligible expenses; and
  • At least 60 percent of the proceeds are spent on payroll costs.

Who is eligible to apply for First Draw PPP Loans?

  • Eligible small entities that have 500 or fewer employees.
  • Existing PPP borrowers that did not receive loan forgiveness by December 27, 2020 may: (1) reapply for a First Draw PPP Loan if they previously returned some or all of their First Draw PPP Loan funds, or (2) request to modify their First Draw PPP Loan amount if they did not accept the full amount the first time around.
  • Any business, 501(c)(3) non-profit organization, 501(c)(19) veterans’ organization, or tribal business concern (sec. 31(b)(2)(C) of the Small Business Act) with the greater of:
  • 500 employees, or
  • That meets the SBA industry size standard if more than 500

Check out the in-depth details on the First Draw program on the SBA website.

You can view the First Draw PPP loan application here.

Second Draw PPP Loans – Another chance

One of the most significant changes with the new PPP is that Congress made funding available to businesses that had previously received a PPP loan. These are also forgivable loans with similar loan terms as the First Draw (see above) or the SBA website

The main difference is who is eligible. Borrowers are eligible for a second-draw PPP loan of up to $2 million, provided they comply with very specific qualifications.

Who is eligible to apply for the Second Draw PPP Loans?

Companies must have:

  • 300 or fewer employees, including Affiliates.
  • Used or will use the full amount of their first PPP loan on or before the expected date for the second PPP loan to be disbursed to the borrower. The borrower must have spent the full amount of the first PPP loan on eligible expenses.
  • A borrower that had a 25% or greater reduction of “gross receipts” when comparing any quarter in 2020 to the same quarter in 2019 or, for ease of calculating, had a 25% or greater reduction in gross receipts in 2020 as compared to 2019.
    • Here is SBA definition of gross receipts: “All revenues in whatever form received or accrued (in accordance with the entity’s accounting method) from whatever source, including the sales of products or services, interest, dividends, rents, royalties, fees, or commissions, reduced by returns and allowances.” 
    • And this includes Affiliates. Gross receipts of a Borrower with Affiliates are calculated by adding the gross receipts of the business concern with the gross receipts of each affiliate.
    • Gross receipts do not include any First Draw PPP Loan that is forgiven.
    • In some cases, you can use tax returns to demonstrate the 25% or more reduction.

You can find the application form for a Second Draw Loan here.

Want to learn more about the PPP program or our ecoCFO services? Please contact us here.