Paycheck Protection Program Loans Round 2.0
The Small Business Administration has already distributed 5.2 million PPP loans worth more than $525 billion. However, on December 27, 2020 the President signed into law the Consolidated Appropriations Act of 2021, as part of a $900
Billion Economic Relief Package to provide extra aid individuals and small businesses impacted by COVID-19.
$284 billion dollars of the relief package was allocated to fund PPP Round 2.0 loans. This legislation provides funding
for new loans to small businesses and it also benefits businesses that had already received a PPP loan in 2020 since PPP Round 2.0 includes a second draw option for prior PPP borrowers who have sustained a 25 percent revenue loss in any
quarter of 2020 as compared to 2019.
Lead Bank is now accepting PPP Round 2.0 applications yet. The PPP reopens Monday, January 11 for new borrowers and certain existing PPP borrowers. Please note that only certain community financial institutions will be able to make first-draw PPP loans Monday and second-draw PPP loans Wednesday, January 13.
How it works
- What are the key changes?
- Only companies with 300 or fewer employees will be eligible for second PPP loans (down from a limit of 500 employees).
- Additional PPP loans will be capped at $2 million (instead of the previous limit of $10 million)
- Applicants seeking a second PPP loan will have to show that their sales in at least one quarter of 2020 dropped by 25 percent or more from the prior year’s levels.
- Eligibility requires verification of a quarter’s 25% decline in 2020 Gross Receipts compared to 2019. Comparative Interim Financial Statements may be used; however, the SBA recognized that some businesses may not
be in a position to readily produce quarterly financial statements, thus 2019 tax returns may be used as a comparison to 2020 year-end Gross Receipts.
- There will be a simplified forgiveness process for loans of less than $150,000. Those small borrowers will just have to sign a one-page form attesting that the money was used for its intended purpose.
- Borrowers can select a covered period of between eight-24 weeks.
- For the first 60 days of the new loan program, $2 billion has been set aside to be given exclusively to businesses with less than 50 employees.
- First Draw Borrower Info – for businesses who qualified under the CARES Act but did not get a loan:
- Second Draw Borrower Info - for businesses that obtained a PPP loan but need additional funding:
- Who is eligible for additional funding or a "second draw"?
- Businesses (non-profit, religious organizations, eligible self-employed individuals, sole proprietors, independent contractors and others) who have been in business since February 15, 2020 and have:
- 300 employees or less
- used or will use all funds for qualified purposes prior to disbursement of a 2nd PPP loan but no requirement to have applied for forgiveness on your first PPP loan
- had a reduction of 25% or more in gross receipts in any quarter of 2020 when compared with the same quarter of 2019. (Specific guidance provided for businesses which were only operating in certain quarters of 2019)
- Who is not eligible for a second draw?
- Entities engaged in political or lobbying activities
- Think tanks
- Businesses owned or controlled by entities in China or Hong Kong
- Businesses that have a member of their of the board of directors residing in China
- Entities that received a grant under the Economic Aid to Hard-Hit Small Businesses, Non-Profits and Venues Act
- When is the PPP Round 2.0 application due?
March 31, 2021
- What does the loan cover?
- PPP Round 2.0 expands PPP’s forgiveable expenses to include supplier costs on existing contracts, including protective equipment, perishable goods, and technology expenditures
- PPP Round 1.0 covers operating expenses, such as payroll, rent, lease payments, utilities, and mortgage interest obligations.
- Payroll costs that may include wages, salaries, retirement contributions, healthcare benefits, insurance premiums, covered leave, and other expenses.
- Will the loan be forgivable?
- Yes, but the loan must be spent 60% on payroll costs based on 2.5 months of average payroll, which is 10-11 weeks. The funds can be used over a 24-week period. For these new loans, any amount not forgiven becomes a loan a
1% for five years.
- Currently there are three PPP loan forgiveness applications. Click below for sample pdfs. Borrowers can continue to use those forms for PPP loans they received earlier in 2020 until new applications are released. We expect the
Treasury and the SBA to release new loan forgiveness applications. In addition, there will be a simplified (but not automatic) forgiveness process for loans less than $150,000.
- What are the tax implications?
Expenses paid with PPP Round 1.0 and Round 2.0 funds are fully deductible and PPP funds received are tax-exempt income.
- Can I reapply for a PPP loan if I returned my first one?
Yes. If a business returned all or part of a PPP loan, then that business may apply for an “amount
equal to the difference between the amount retained and the maximum amount applicable.” Or, if a business did not accept the full amount, then that business may request a modification to allow the business to borrow the full
eligibility amount. (The SBA Administrator will issue guidelines for those who want to reapply or apply for additional funding from their first PPP loan.) .