Relief is on the way for small businesses! President Donald Trump recently signed a new $900 billion coronavirus relief and stimulus package law. This law extends the Paycheck Protection Program (PPP), with about $284 billion in forgivable federally backed loans for small businesses.
In the first round of PPP, there was quite a bit of confusion surrounding the loan amounts, terms, and usage. This new round of funding called the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act serves to clarify questions about the loan process and adds a few new rules for applying for the new loans and forgiving the old ones.
Many business owners have questions regarding this new round of funding and how it will work. We’ve put together a few of the most frequently asked questions to help clarify any confusion. The program details are still unfolding so be sure to check back for additional updates in the coming weeks.
Are certain businesses eligible for more help than others?
These new loan amounts are determined by a formula involving payroll costs multiplied by a factor of 2.5, which is capped at $2 million. However, restaurants and hospitality businesses are able to multiply those costs by 3.5, which potentially makes them eligible for more funding.
Some companies are restricted from applying for additional funding, including businesses involved in political or lobbying activities. Businesses with extensive dealings with China, or have China residents on their boards are also restricted from funding.
Concert venues, theaters, and museums are not included in this round of Paycheck Protection Funding. However, the “Shuttered Venue Operator Grants” is available to them with funding up to $10 million.
If I have already applied for the first round of funding, can I apply to this one as well?
Yes, applying for the first round of funding and this round is well within the requirements. However, with this round of funding, there are a few new requirements that may hinder your ability to apply.
The requirements changes include:
- Applicants must have no more than 300 employees.
- New loans are capped at $2 million.
- Applicants must demonstrate at least a 25% drop in gross receipts from the Q1, Q2, Q3 of 2020 to the same quarter in 2019.
- The covered expenses expanded to include cloud computed or remote work software, equipment for government-mandated sanitation and social-distancing, and property damage and vandalism due to the public disturbances that occurred during 2020.
If this is my first time applying, do the new requirements or the old requirements apply to me?
If this is your first time applying for PPP funding, or you applied in the first round but did not receive funds, the original requirements apply to you. The new requirements apply to only companies who received original PPP funding.
How do I prove that I had a reduction in revenues and qualify for the PPP?
Loans under $150,000 only need a one-page document with information attesting that you meet all the requirements. Loans larger than $150,000 should consult with their lender to understand the necessary documentation and information needed for an application, as well as documentation needed to forgive the loan.
Does the change in loan amount apply to everyone, or just those who have applied and received funding in the first round?
If this is your first time applying for PPP funding the maximum loan amount remains at $10 million. For those who have received a loan of any amount, the new maximum for your second loan is $2 million. In either case, calculating your maximum forgivable loan amount if 2.5X your monthly payroll expense, and 3.5X monthly payroll for those in the food services industry.
What are the requirements surrounding how I spend the loan amount?
For those who are new to PPP funding, it is important to understand that 60% of the loan amount must be spent on payroll costs. The other 40% can be allocated to certain mortgage expenses, rent, utility payments, personal protective equipment for employees, supplier costs, and operations expenditures/ property damage costs due to public disturbances in 2020. There is still quite a bit unknown about these categories, as more information comes out we will update you on the specifications!
Do I have to pay taxes on the covered expenses?
The loan is tax-free income, however you may take tax deductions for the expenses covered by the forgiven loans. There will be further clarification as we move forward.
When will the applications be open?
Congress has given 10 days from the passing of the bill to roll out the second PPP funding. The President is not yet ready to sign the bill, so the applications should open sometime in early January. Once the bill has been signed, the 10-day window begins.
Where is the best place to apply?
The loan money will be available at any bank that is participating and approved to give loans under the SBA. There are also other lending agencies which will have loan money available. It is best to apply at banks you already have a relationship with. In the first round there were expedited services for these companies.
As more updates come out surrounding the additional PPP funding we will update this post. Please check back in the next few weeks to see any additional requirements, specifications, or additional information.