New Round of PPP Loans

For those who have suffered financial losses due to Covid-19 in 2020, the following might be of interest to you. SBA is offering a new round of PPP2 Loans for those who received a PPP loan in 2020 and reopening PPP loans for those who haven't received an initial loan.  The SBA is currently taking applications via community financial institutions and is expected to open up the application process to other financial institutions this week.

 Do you Qualify for a PPP2 Loan?

To qualify for a Second Draw PPP Loan, you have to meet five requirements:

• You're a business, independent contractor, eligible self-employed individual, sole proprietor, nonprofit organization, eligible for a First Draw PPP Loan, veteran’s organization, Tribal business concern, housing cooperative, small agricultural cooperative, eligible 501(c)(6) organization or eligible nonprofit news organization that:

• Has 300 or fewer employees, unless you're a business that satisfies the North American Industry Classification System (“NAICS”) code beginning with 72 or an eligible news organization with more than one physical location.

• Experienced a revenue reduction of 25% or greater in 2020 relative to 2019 (more on this below).

• Received a First Draw PPP Loan

•  Have used, or will use, the full amount of the First Draw PPP Loan on or before the expected date on which the Second Draw PPP Loan is disbursed to the borrower"

Do you Qualify for a PPP first draw loan?

These loans are available to borrowers who were in business on February 15, 2020 and were one of the following:

• Businesses with 500 or fewer employees that are eligible for other SBA 7(a) loans.
• Sole proprietors, independent contractors, and eligible self-employed individuals.
• Not-for-profits, including churches.
• Accommodation and food services operations (those with North American Industry Classification System (NAICS) codes starting with 72) with fewer than 500 employees per physical location.
• Sec. 501(c)(6) business leagues, 
•  that have 300 or fewer employees and do not receive more than 15% of receipts from lobbying.  Sports leagues are not eligible.
• News organizations that are majority-owned or controlled by an NAICS code 511110 or 5151 business or not-for-profit public broadcasting entities with a trade or business under NAICS code 511110 or 5151. The size limit for this category is no more than 500 employees per location.

Maximum loan amount:

In general PPP and PPP2 borrowers may receive a loan amount of up to 2.5 times their average monthly payroll costs (subject to wage cap of $100,000 per employee) in 2019 or 2020, or for the 12 month period prior to your application. PPP borrowers with NAICS codes starting with 72 (such as hotels and restaurants) can receive up to 3.5 times their average monthly payroll costs on second-draw loans.

Eligible Costs for Forgiveness:

PPP and PPP2 loans can be forgiven if the funds are used on eligible costs. Eligible costs include payroll, rent, mortgage interest and utilities. The following costs are now also eligible:

• Expenditures related to complying with Covid-19 Federal health  and safety guidelines;
• Certain property damage costs related to vandalism or looting due to Covid-19 public disturbances;
• Expenditures to suppliers that are essential at the time of purchase to the recipients current operations;
• Expenditures related to business software or cloud computing service that facilitates business operations.

For full loan forgiveness, payroll costs must be at least 60% of loan proceeds for the covered period.

Application Process

I recommend that you contact your financial institution as soon as possible about applying for your PPP or PPP2 loan.  The round 2 loans require much of the same documentation as was required for the initial PPP loans and therefore you may not have to provide it all over again.