Round 2 of the Paycheck Protection Program (PPP) is just around the corner. This program is designed to provide much-needed help for businesses adversely affected by the COVID-19 pandemic. Business owners, whether they’re applying for the first time or who participated in Round 1, have many questions about how this latest update will work. Below, you’ll find answers to some of the top questions. However, the program details are still unfolding so be sure to check back for updates.
If I applied for the previous PPP can I apply to this one as well?
Yes, there are no complications between applying/receiving the first PPP and applying for this one other than a few changes in requirements.
If I received the first PPP, are the requirements for this one the same?
While there are many similarities, there also have been some important changes in the requirements. These include:
- The size requirement is now 300 or less for most business.
- You must be able to prove that your company experienced a 25% reduction in gross receipts during Q1, Q2, or Q3 of 2020 when compared to the same quarter in 2019.
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 to the PPP or you applied and did not receive funds, the original requirements apply to you. The new requirements listed above only apply to companies who received the original PPP.
Is the maximum loan size the same? How much can I get a loan for?
If this is your first PPP the maximum is the same at $10,000,000. If you received a loan previously of any amount, the new maximum for your second loan is $2,000,000. For both instances, the way to calculate your maximum forgivable loan amount is 2.5X your monthly payroll expense. The exception to this rule is for the food services industry; they can receive a loan for 3.5X their monthly payroll.
How do I prove that I had a reduction in revenue and qualify for the PPP?
If your loan amount is under $150,000, then all that is needed is a one-page document with a small amount of information attesting that you meet all requirements. If your loan is larger than $150,000, it is important to consult with your lender regarding the documents and information they need for an application as well as what documents and information they will need to forgive the loan.
What can I spend it on to ensure it is all forgiven?
For both newcomers and returning PPP users, it is important to note that 60% of your loan must be spent on payroll. The other 40% can be used on certain mortgage expenses, rent and utility payments, personal protective equipment for employees, supplier costs, and operations expenditures/property damage costs due to public disturbances in 2020. Some of these categories are very broad, and we will update as more clarification is given.
Do I have to pay taxes on covered expenses?
You may take tax deductions for the expenses covered by the forgiven loans despite the loan being tax-free income. We still are waiting for further clarification on this.
When can I apply?
Congress has given itself 10 days from the passing of the legislature to roll out the second PPP. The President has indicated that he is not yet ready to sign this bill, and so it appears businesses will not be able to apply until early January. Once the bill is signed, the 10-day window goes into effect for the rollout of the program.
Where can I apply?
As with the first PPP, the loan money will be available to any bank that is approved to give loans under the SBA as well as many other lending agencies. It is recommended to apply at banks you already have a relationship with as we saw expedited service for these companies during the first wave of PPP.