Memo – New PPP Loans Available (Dec 2020)

We are awaiting guidance from the Small Business Administration (SBA) and plan to begin processing new PPP loan applications in the coming weeks.

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IMPORTANT NOTE: (To Save You Time)

To apply for the 2nd PPP loan, you will need to demonstrate at least a 25 percent reduction in revenue between any one quarter in 2019 and 2020. You may select the relevant quarter for comparison. In addition, you must have spent all of the proceeds from the first PPP loan before funds from the second draw are disbursed.

On December 27, the President signed legislation to reopen the Paycheck Protection Program (PPP), with over $284B available in forgivable PPP loans. First-time borrowers must have 500 or fewer employees and meet other eligibility criteria. In addition, second PPP loans are available to businesses that received a PPP loan previously if they have 300 or fewer employees and meet other eligibility criteria. PPP loans are available until March 31, 2021, or until all allocated funds are disbursed. If you already have a PPP loan, here are some important notes about applying for forgiveness. 

Borrowers have 10 months from the end of their applicable Covered Period or Alternative Payroll Covered Period to apply for forgiveness or they will need to begin repaying their loan with an interest rate of 1 percent.

This means you have 10 months AFTER your 24 week forgiveness period ends to apply for forgiveness.

How to Apply

On December 27, the President signed legislation to reopen the Paycheck Protection Program and permits previous borrowers to apply for a second PPP loan. Below is information to help you determine if you qualify for a new PPP loan and how to apply.

Who can apply?

• For first-time borrowers, businesses must have 500 or fewer employees. Borrowers applying for a second PPP loan must have 300 or fewer employees. These thresholds apply to nonprofits, veterans’ organizations, Tribal business concerns, sole proprietorships, self-employed individuals, and independent contractors.
• Please note that certain businesses over the respective employee limit, including franchises and NAICS 72 businesses (Accommodation and Food Services), may still qualify.
• All borrowers applying for a PPP loan need to meet the SBA’s certification of need requirement, attesting that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.”
• Businesses using a Professional Employer Organization (PEO), or transitioning to a PEO, that meet the eligibility criteria for a loan can apply. (See SBA FAQ #10 for more information)

When can I apply?

• PPP loans can be issued immediately. Check with your lender to determine when they may start to accept new PPP loan applications. Applications are open until March 31, 2021, or until allocated funds are exhausted. Businesses are advised to file as soon as possible. Once the allocated funds are disbursed, no new loans will be issued.

Where can I apply?

• Check with your lender, but you can apply through any existing SBA lender or through any federally-insured depository institution including a federally-insured credit union, or Farm Credit System institution that is participating. Other regulated lenders will be available to provide these loans once they are approved and enrolled in the program. Visit SBA’s website for a list of eligible lenders.

What do I need to apply?

• You will need to complete the PPP loan application, which your lender will provide, and submit the application with your payroll documentation. If you are applying for a second PPP loan, remember to run new PPP loan application reports from your ADP system. The ADP reports are updated frequently to reflect the latest government guidance. You should always run the applicable PPP report as close in time to submitting your PPP loan application as possible. For your reference, click here for application form provided by the SBA.

What is the maximum amount my PPP loan can be?

• Loans are limited to $10 million or less. (Borrowers applying for a second PPP loan are limited to $2 million or less.)

Are there special rules for businesses applying for a second PPP loan?

• Yes, in addition to having 300 or fewer employees and loans being limited to $2 million or less, businesses applying for a second PPP loan will need to demonstrate at least a 25 percent reduction in revenue between corresponding quarters in 2019 and 2020. The borrower may select the relevant quarter for comparison. Special rules apply to borrowers that were not in business for all or part of 2019. In addition, the borrower must have spent all of the proceeds from the first PPP loan before funds from the second draw are disbursed.

What other documents will I need to include in my application?

• Check your lender’s requirements, but we expect, at a minimum, you will need to provide your lender with payroll documentation.

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Chris Whalen, CPA
(732) 673-0510
81 Oak Hill Road
Red Bank, NJ 07701
www.chriswhalencpa.com

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