PPP Loans – Second Round
The second round of loans through the Paycheck Protection Program (PPP) has begun. Small businesses can apply for these loans through March 31. There are differences between the first and second round of the PPP loans. One significant change to these loans, which were designed to keep small businesses in business during the pandemic, is that businesses can now apply for a second loan. Other changes to the PPP should make the process easier.
Applying for a second loan can be easier than applying for the first. Using the same financial institution you used for your first PPP loan will save you a lot of time. They will have all your paperwork which will expedite the process. Some financial institutions will also prioritize customers with whom they have an existing business relationship.
This second round of PPP lending is excluding some of the bigger businesses and corporations that were included in the first round. Now businesses can only have up to 300 employees to qualify as opposed to 500 employees in the earlier round. The exception is hotels and restaurants which may still have up to 500 employees. Other businesses that are ineligible include publicly traded companies, lobbying or political businesses and companies affiliated with China.
Your business's gross receipts must be 25% lower in any quarter in 2020 compared to the same quarter in 2019 to qualify for a second loan.
Loan forgiveness is easier to attain in this second round of PPP loans. A business trying to receive forgiveness of their loan needs to choose an eligible period to spend their funds between 8 and 24 weeks. Along with the eligible expenses of payroll, rent, mortgage interest, and utilities of the first round, the second round has also included operations costs, property damage, supplier costs, and worker protection items.
A small business may also retroactively claim the Employee Retention Tax Credit (ERC) back to March 2020 through to the second quarter of 2021. On a quarterly basis the ERC allows a credit up to $5000 per employee for 2020 and up to $7000 for 2021. Be aware that the same payroll dollars cannot be allocated for ERC and PPP forgiveness.
Economic Injury Disaster Loans (EIDL) no longer need to be subtracted from your forgivable PPP funds. In fact, forgiveness will apply retroactively to all PPP loans from the first round. If the EIDL has been previously deducted you will receive remittance payments plus interest.
Applying for a PPP loan has been made easier for sole proprietors. Their PPP loan eligibility amount is now based on their net profit from 2019. Their average monthly net profit is determined, to calculate their maximum PPP loan amount, which is 2.5 times the monthly profit up to $20,833.
Several changes have been made to the PPP, which is making it easier for small businesses to apply for the loans and to receive forgiveness for them. If your profits were substantially lower in 2020 than in 2019 you may well qualify for the assistance this second round of the PPP provides.
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Amanda Y. Cordes, Esq.
Shoffner & Associates
Counselors to Small Business and Families.
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