PPP Round 2 Highlights

A deeper look at what the second round of PPP funding is bringing to the table.

It’s no secret that Capitol Hill has been busy of late dealing with the fallout from the election and of course, the response to the ever-present covid-19 pandemic. With provisions from the Coronavirus Aid, Relief, and Economic Security (CARES) Act set to expire soon, the main focus has shifted to a new stimulus package and relief for the American people and economy.  That is precisely where the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act comes in. 

Signed on December 27th, 2020 by President Donald Trump, this new act is a fundamental portion of the Consolidated Appropriations Act of 2021. Designed to provide additional assistance to the hardest-hit small businesses, nonprofits, and venues, this $325 billion package will assist small business owners with critically needed capital to stay afloat during the pandemic. While the act covers many critical resources for even the smallest of businesses, the main focus of the act is the continuation and expansion of the Paycheck Protection Program (PPP).

With the latest bill, an extension has been granted for first-round PPP borrowers to continue borrowing under the original PPP (PPP1), which still holds unclaimed funds. This extension comes with new, more strict eligibility restrictions, however, as well as some minor improvements to the program overall. PPP1 will be extended through March 31st, 2021. 

For the second round of PPP (PPP2), there is a $2 million cap that replaces PPP1’s $10 million funding cap. Eligible businesses are defined as having a maximum of 300 employees and the ability to demonstrate at least a 25 percent reduction in gross revenues between comparable quarters in 2019 and 2020. PPP2 is also authorized for second time PPP borrowers who have already exhausted funding from the first round. Publicly traded companies are not eligible for PPP1 or PPP2. 

Even with more strict eligibility requirements, there are still some terms of the extension that make it easier for businesses to acquire additional funding. The allowance of 1st round PPP borrowers to apply for 2nd round funding, for example. Another new term is that PPP borrowers are now in control of the end date for their forgiveness covered period, which can be anywhere from 8 to 24 weeks, at the borrower’s discretion, but must start on the date that the loan is disbursed. Borrowers receive full PPP loan forgiveness so long as they utilize no less than 60% of the loan proceeds towards payroll costs over the time period of their choosing. 

Additional types of forgivable expenses, including certain supplier costs and certain group insurance payments, are now permitted under the new rules. Even more advantageous to small business owners, expenses paid using PPP funds are now tax-deductible. Another thing to note with the new act is that it has been confirmed that forgiven PPP funding will not be considered when calculating a borrower’s gross income. 

Other notable changes include a wider scope of eligible entities, as well as a clearly defined list of ineligible entities. Now eligible under the extension are churches and religious organizations (with added protections), certain 501(c)(6) nonprofits and Destination Marketing Organizations,  local newspapers, T.V., and radio stations previously made ineligible by their affiliation with other stations, and the act even adds a $15 billion grant program to support shuttered live venues, theaters, museums, and zoos that have experienced significant revenue losses. The act details ineligible businesses for the PPP program which includes publicly-traded businesses; entities listed in 13 C.F.R. 120.110 (except for entities from that regulation which have otherwise been made eligible by statute); entities affiliated with entities in the People’s Republic of China; registrants under the Foreign Agents Registration Act; and entities that are receiving a grant under the live venues grant program.

PPP round 2 may very well be a saving grace for many small businesses, if you find that you are in need of funding and meet the eligibility requirements for the PPP program, don’t hesitate to reach out to us for assistance with securing your PPP forgivable loan. 

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