PAYCHECK PROTECTION PROGRAM (PPP) RE-OPENS WEEK OF JANUARY 11, 2021
Applications for PPP2 Loan Expire March 31, 2021
Over $248 billion is available for new loans, thanks to the new stimulus bill legislation, the 2021 Consolidated Appropriations Act (CAA) that was signed into law on December 27, 2020.
The Small Business Administration (SBA) has announced that in order to promote access to capital, initially only community financial institutions will be able to make First Draw PPP loans on Monday, January 11, and Second Draw PPP loans on Wednesday, January 13. PPP is expected to open to all participating lenders shortly thereafter.
Eligibility for Second Round PPP Loans (PPP2)
- Available to first-time qualified borrowers
- Available to borrowers that previously received a PPP loan and will or has used full amount for authorized uses
- Second-time borrowers must have 300 or fewer employees, and before applying for forgiveness, borrowers must prove that they saw at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020.
Use of PPP Funds
Congress expanded the types of expenses for which PPP loans can be used, which applies to existing PPP loans (except in the event forgiveness has already been obtained) and new loans. In order for PPP2 loan fund to be forgiven, they must be used within 8-24 weeks of receiving the loan. Also, at least 60% of the funds must be used for payroll costs, and up to 40% may be spent on operating costs such as rent, covered mortgage interest and utilities, as well as newly approved expenses:
- Covered Operations Expenditures
- Covered Property Damage Costs
- Covered Supplier Costs
- Covered Worker Protection Expenditures
As a reminder, PPP loans are designed to be 100% forgivable if the proceeds are spent in accordance with program rules. Additional Paycheck Protection Program Round 2 highlights and immediate information can be found on the U.S. Small Business Administration website.
How To Apply
As during the initial round of PPP loans in 2020, the Small Business Administration (SBA) will not accept PPP applications directly from small businesses during the current 2021 round — you must apply through a participating financial institution. The program is expected to close to all borrowers on March 31, 2021.
Maximum Loan Amount
The maximum loan amount in the second round is $2 million. Borrowers have an option to calculate the maximum loan amount by multiplying the borrower's average total monthly payroll by 2.5x. One of the following must be used when calculating the maximum loan amount:
- The one-year period prior to the date on which the loan is made, OR
- Calendar year 2019
Maximum Loan Amounts for the Hospitality Industry
Borrowers that have NAICS Code 72 (typically restaurants and hotels) are permitted to use a 3.5x multiplier of their average monthly payroll costs to calculate their maximum loan amount, subject to the $2 million cap.
For more information, visit U.S. Small Business Administration Paycheck Protection Program
EIDL GRANT APPLICATIONS TO OPEN BY JANUARY 17, 2021
The new federal recovery law includes more funding for Economic Injury Disaster Loan (EIDL) advance grants. The Small Business Administration (SBA) has indicated the EIDL grant application will be available by January 17, 2021.
The EIDL grant is a form of small business relief providing $10,000 dollars in grants, i.e., completely free and non-repayable money, to select small businesses. The grant program was part of the initial CARES Act in 2020, but funds were exhausted within months. In December, Congress allocated additional funds for the program.
Who is Eligible:
- Business was in operation prior to January 31, 2020,
- Business has less than 300 employees,
- Business is located in a low-income community,* and
- Business suffered at least a 30% reduction in gross receipts during any 8-week period between March 2, 2020 – December 31, 2021 compared to a comparable 8-week period before March 2 or in 2019.
* What is a low-income community? This article https://entrecourier.com/2021/01/02/how-to-tell-low-income-community-eidl/ explains how to determine if you live in a low-income community.
When to Apply:
Authorized through December 31, 2021, but applications close when funds run out – so if eligible, apply fast. SBA hopes to be accepting applications on or around January 17, 2021.
How to Apply:
The SBA Application portal should be ready by January 17, 2021. Small businesses should monitor the SBA website daily for more information.
- EIDL advance grants are not counted as gross income for tax purposes.
- Once you apply, the SBA is required to make a determination on application approval within 21 days.