Article Highlights:
- Paycheck Protection Program
- Eligible Entities
- Loan Terms
- Loan Forgiveness
- Forgiveness Reduction
- Simplified Loan Forgiveness
- Deductibility of Expenses
- Funds Availability
Congress passed, and President Trump signed, the Consolidated Appropriations Act, 2021. Included in its approximately 5,600 pages is a second draw of forgivable Paycheck Protection Program (PPP) loans. The first round allowed loans to businesses with 500 or fewer employees and to certain businesses with multiple locations, for which each location could not have more than 500 employees. Unfortunately, this opened the door to some large businesses gobbling up the allocated funding and shutting out the smaller businesses that the loans were intended to help until additional funding was authorized.
Unlike the prior loan program, this round will truly be limited to small businesses that incurred revenue losses.
Eligibility is limited to businessesArticle Highlights:
- Paycheck Protection Program
- Eligible Entities
- Loan Terms
- Loan Forgiveness
- Forgiveness Reduction
- Simplified Loan Forgiveness
- Deductibility of Expenses
- Funds Availability
- with 300 or fewer employees per physical location;
- that had previously received a PPP loan; and
- that can demonstrate that they sustained at least a 25% reduction in gross receipts in the first, second, or third quarter of 2020 relative to the same 2019 quarter. Businesses submitting an application on or after Jan. 1, 2021, are eligible to utilize the gross receipts from the fourth quarter of 2020.
Eligible Entities – The eligible entities include for-profit businesses, certain non-profit organizations, housing cooperatives, veterans’ organizations, tribal businesses, self-employed individuals, sole proprietors, independent contractors, and small agricultural co-operatives. Churches and religious organizations are eligible for loans if they otherwise meet the requirements, and the legislation prevents future administrations from making them ineligible.
Loan Terms – The legislation establishes a maximum loan size of 2.5 times the average monthly payroll costs in the one year prior to the loan, or the calendar year, up to $2 million. There is an exception for borrowers in the hospitality or food services industries, who may receive PPP Second Draw Loans of up to 3.5 times average monthly payroll costs. Only a single PPP Second Draw Loan is permitted to an eligible entity.
Loan Forgiveness – Like the first PPP loan, full loan forgiveness is available if the borrower spends at least 60% of the second draw on payroll costs (this time including additional group insurance payments, including vision, dental, disability and life insurance), with allowable nonpayroll costs of 40%.
The allowable non-payroll expense category – which was originally limited to rent, mortgage interest, and utilities – has been expanded to include the following: