Update Paycheck Protection Program
The Small Business Administration (SBA) published their guidelines for the Second Round of PPP loans (“PPP2”) which was signed into law late December (The Consolidated Appropriations Act, 2021). This is the second largest federal stimulus package following the previous CARES Act that was signed earlier in 2020. This second round offered another round of Paycheck Protection Loans (“PPP2”), which could potentially benefit some of TABS’ clients. Like the first round of PPP, the loans are meant to help small businesses who have suffered during COVID by providing fully forgivable loans, however there are a few changes that may disqualify some clients.
The major changes presented are as follows:
- A company must show proof that it suffered at least a 25% decrease in gross earnings in any quarter of 2020, compared to the same quarter in 2019. Which quarter is chosen is the decision of the company, as long as the compared quarters are the same in these two years. During the first round of PPP loans, this requirement wasn’t there
- Covered business expenses to use the loan for have been partially expanded to include operation expenditures (such as Work from Home Software or sneeze guards), property damages (as a result of COVID-19 and other protests) and workers’ protection costs.
- For companies that qualified to obtain the first PPP loan, they must have depleted, or will deplete the full funds of that loan.
- A company must have no more than 300 employees, rather than 500 employees with the first PPP loan.
- The maximum loan a company can receive is $2mil, rather than the $10mil loans that were issued to companies in the first round of PPP loans.
- Lastly, the “Covered Period” term has become more flexible, with the first loan you either had the choice to use the 8-week period, or the 24-wk period to show proof you used at least 60% of your funds for payroll, whereas during this second round you may choose any period between 8 and 24 weeks.
With the new guidelines published it became clear that the SBA has also reopened their application for the first round of PPP loans and encourages eligible businesses that were not able to, or missed the deadline for the first PPP loan to apply now. At this time, the application is only open to small financial institutions to accept loan applications, however it will shortly be opened to all banks and financial institutions as well. If you do not have a lender yet, the SBA website provides a lender match tool to find one (https://www.sba.gov/funding-programs/loans/lender-match). No changes have been made to the eligibility requirements since the application period ran out in August of last year. Please note however that the eligibility requirements in August were different from those in April when the first PPP loans were being accepted.
For those that have already applied and received the first PPP loan, you may be eligible to apply for PPP2. One important factor however is that you must show a decrease of 25% in gross receipts in any quarter of 2020, compared to that same quarter in 2019. A few other changes have also been applied when comparing it to the first PPP loan, which TABS does not believe to immediately affect our clients’ eligibility to apply. For example, the non-payroll costs that can be considered as part of the forgiveness application have been expanded. More information can be found here, or you may contact TABS directly for assistance.
For more information, visit the SBA website (First Draw PPP Loans /Second Draw PPP Loans) or contact TABS HR@tabsinc.com if you believe you may qualify and/or are looking for more information on how to apply.