“Money, if it does not bring you happiness, will at least help you be miserable in comfort.” – Helen Gurley Brown (Author/Publisher)
On January 8, 2021, the U.S. Small Business Administration (SBA) announced that the Paycheck Protection Program (PPP) re-opened its acceptance of applications for capital access from both new borrowers and certain existing PPP borrowers beginning the week of January 11th. Community banks and financial institutions began accepting first draw and second draw PPP applications starting the week of January 11th. All other participating lenders were allowed by the SBA to begin accepting PPP applications shortly thereafter.
The SBA also issued some new guidance surrounding this round of PPP which authorizes up to $284 billion toward job retention and certain other expenses through the application deadline of March 21, 2021. Key PPP guidance updates include the following:
- First time borrowers are encouraged to apply for the PPP loan as the SBA has made it clear that small businesses that have yet to receive PPP funding can apply for their first such loan.
- The SBA has set aside $15 billion in funds for small businesses with ten or fewer employees who are applying for their first PPP loan. These small businesses do not need to demonstrate the 25% revenue decline requirement when pursuing your first draw PPP loan.
- First draw application loans can be calculated using either 2019 or 2020 financials for small business applicants. Maximum PPP loan calculations still follow the methodology from the first round PPP applications in 2020—2.5 times the allowable monthly payroll costs, up to $10 million.
- Small businesses who were approved for PPP in 2020 but ultimately turned it away or returned funds, can re-apply up to $10 million maximum limit for first time borrowers.
- Second draw borrowers must demonstrate the 25% revenue reduction requirement in any quarter in 2020 compared to the same quarter in 2019. You may also compare full year 2020 to full year 2019 to meet the 25% revenue decline requirement.
- Second draw PPP applicants should also apply for forgiveness on their original PPP loan prior to applying for PPP2. However, your second PPP loan application will not be delayed if the forgiveness process on your first PPP has not been completed.
- If your first PPP loan was not fully forgiven, second draw borrowers can still apply for a second PPP as longs as they can certify that all the funds from PPP1 have been spent (or will be spent) prior to receiving PPP2 funds.
- If second time PPP borrowers use the same lender from their first PPP, the SBA will not require additional documentation—although the lender most likely will.
- If a second draw applicant did not accept the full amount possible and was eligible for more money under PPP1, you can apply for an increase under PPP2 with supporting documentation.
- In general, you have greater flexibility in setting your loan coverage period between eight to twenty-four weeks.
- In general, full forgiveness for PPP2 requires that at least 60% of PPP funds be utilized for eligible payroll costs, while the remaining 40% be utilized towards:
- Additional payroll costs,
- Mortgage interest,
- Rent and utilities,
- Personal protection equipment and facility modifications to help you comply with Covid-19 health and safety guidelines,
- Operating expenses for software, cloud computing services, and accounting,
- Essential payments to suppliers for your business’ operations.
These are the notable highlights pertaining to this second round of PPP money in 2021. However, there are still so many details—that like in the first round of PPP in 2020—can be everchanging. The team here at The Foresight Companies are ever so able and willing to help, explain, answer questions, and guide our clients through the gauntlet.
As of this writing, the SBA has yet to provide greater guidance on the Economic Injury Disaster Loan (EIDL) grants. However, I will communicate new EIDL information as soon as new details emerge.
Lastly, I will leave you with another quote from the Dalai Lama:
“If we find we cannot help others, the least we can do is desist from harming them.”
As we continue to navigate through these times of uncertainty and adapt, we here are at The Foresight Companies want to be your source for all topics related to your business operations.
Please visit our COVID-19 Business Operations Resource Center frequently for updates.
*Please note that as information is updated and modified, terms and conditions are subject to change.