On 1/6/2021, The U.S. Small Business Administration (SBA) and Treasury issued new temporary guidance for the new round of Paycheck Protection Program, or as some are calling it, PPP2.
The COVID-19 Relief bill was signed into law on December 27, 2020, provided $325 billion in forgivable loans as part of the reinstated PPP (PPP2). Payroll, rent, covered mortgage interest, and utilities are eligible costs for PPP2. Unlike the first round of PPP, the PPP2 will potentially make the following additional expenses potentially forgivable:
- Covered worker protection and facility modification expenditures
- Expenditures to suppliers that are essential at the time of purchase to the recipient’s operations
- Covered operating costs such as software and cloud computing services
Two Interim Final Rules (IFRs) were issued based on whether the loan was a first-time or second-time draw.
The SBA released an 82-page IFR with consolidated rules for first-time borrowers. It also outlines the changes made by the Economic Aid to Hard-Hit Businesses, Nonprofits, and Venues Act. These loans are available to first-time borrowers who fall into the following groups:
- 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
- Accommodations and food services operations with fewer than 300 employees per physical location
The SBA released a 42-page IFR with guidance for businesses with a second PPP Loans. Businesses are eligible for a second PPP loan of up to $2 million if they:
- have fewer than 300 employees
- have used or will use the full amount of their first PPP loan
- can show a 25% gross revenue decline in any 2020 quarter as compared to the same quarter in 2019
Application for Forgiveness
The new bill created a simplified forgiveness application process for loans of $150,000 or less. “The SBA will create a simplified application form within 24 days of the bill’s enactment and may not require additional materials unless necessary to substantiate revenue loss requirements or satisfy relevant statutory or regulatory requirements. Borrowers are required to retain relevant records related to employment for four years and other records for three years, as the SBA may review and audit these loans to check for fraud.” (Journal of Accountancy)
For more information on loan amounts, the forgiveness application or other details on the PPP2, please contact your advisor.
This material is generic in nature. Before relying on the material in any important matter, users should note date of publication and carefully evaluate its accuracy, currency, completeness, and relevance for their purposes, and should obtain any appropriate professional advice relevant to their particular circumstances.