Important Information about the Second Round of PPP

PPP loan application with sticky noteThe long-awaited second round of COVID relief was rolled out with the New Year, including an expansion and extension of the Paycheck Protection Program. Many businesses can be eligible for additional funding from the government, which may help your company make it through what are hopefully the final months of the COVID-19 crisis. According to a survey of business owners conducted by Alignable, 85% of businesses feel they need this additional financial relief to keep their companies running. If you’re one of them, here’s what you need to know about this second round of PPP loans.

Additional Funding and Extension

The new legislation provided for an additional $284 billion in the Paycheck Protection Program, as well as extending the program through March 31, 2021. We want to point out this extension upfront, as it’s obviously not too far into the future. If you hope to claim another round of PPP funding, you’ll need to apply soon.

You Can Claim a Second Loan

It’s important to note that, while the legislation does hope that PPP funding can reach previously underserved businesses, it is not exclusively for business owners who haven’t had a PPP loan. You are, in fact, allowed to claim another PPP loan in this second round of funding, so long as you meet the requirements. Those requirements are as follows:

  • No more than 300 employees (if multiple locations, 300 employees per location)
  • Loss of 25 % in gross receipts in any quarter of 2020 when compared to the same quarter of 2019
  • Used full amount of first PPP loan before the second is disbursed

If you meet these qualifications, you can apply for another PPP loan based on your losses.

Loan Amount Based on Paycheck Expenses

As with the first round of PPP funding, the amount you’ll receive is based on how much you pay out in payroll expenses each month. For most businesses, your loan amount will be your average monthly payroll costs for 2.5 months. For businesses in the food services and accommodations industry, the maximum loan amount will be 3.5 months of payroll expenses. Of course, there are no guarantees that you’ll qualify for that full amount; this is simply the general rule. The maximum amount on any loan is $2 million.

Additional Businesses Are Now Eligible

It’s also important to note that the expansion of the Paycheck Protection Program includes new business types not included in the first round of funding. This includes:

  • 501(c)(6) nonprofits
  • TV stations
  • Radio stations
  • Local newspapers
  • Public broadcasters
  • Housing cooperatives

If you did not qualify for funding in the first round of PPP because you were one of the aforementioned business types, we strongly recommend that you apply for a loan this time.

Independent Contractors Are Still Eligible

While this isn’t a change from the first round of PPP, we do want to emphasize the fact that independent contractors and “solopreneurs” are eligible for a PPP loan, just as they were with the first round of funding. Due to the program’s name, many people in this category believed they would not qualify because they’re not issuing paychecks to employees. However, you are considered an employee, and your income is considered a payroll expenses. This means that you do, in fact, qualify for a PPP loan of up to 2.5 times your average monthly income.

There Are Additional Funding Programs

While PPP loans are the primary source of relief funds for most small businesses, there are other means of acquiring the money your business needs, if you don’t qualify for a PPP loan. The second COVID-19 relief package also includes $20 billion in additional funding through the Economic Injury Disaster Loans Advance program. This program, among other things, supplies grants to eligible applicants in low-income communities who didn’t get grants in the first round due to funds running out. Contact the SBA if you’re interested in this program.

There is also a new grant program for shuttered businesses—specifically, live venues, movie theaters, and other cultural institutions—who experienced a revenue loss of 25% or more.

If your business needs additional relief funding, our expert accountants can help you to apply for a second PPP loan or other grant program under the new stimulus package. Please reach out to us to schedule an appointment and discuss what programs you might be eligible for and how much of a loan or grant you might be able to receive. Contact us today, and ensure you get your PPP loan before March 31!