PPP 2.0 starts on Jan 11, 2021 - What You Need To Know
The new round of PPP loan is here! On Dec 27th, 2020 congress revived the PPP as part of the $900 billion COVID - 19 relief bill. On Jan 6th, 2021 night, the U.S. Small Business Administration (SBA) and Treasury issued guidance for the Paycheck Protection Program (PPP).
The proposed bill allows new and old borrowers to receive a PPP loan if they meet the requirements of an “eligible entity.” The next round of lending will open on Jan 11, 2021, and the last day to apply for and receive a PPP Loan is March 31, 2021. If you may recall, the PPP 1.0 loan was gone within two weeks. While waiting for the PPP application to open, let’s use the time wisely and start preparing for the paperwork now if you plan to apply.
Updates:
You don’t need to wait for the PPP 1.0 forgiven. You can apply for the second draw without getting the first one forgiven.
Remember to write the 10 digit loan application numbers from your first loan on the second loan.
Paycheck Protection Program - Participating Lenders By State: List from SBA
PPP Second Draw Borrower Application Form: PDF
Paycheck Protection Program Borrower Application Form (Updated 2021): PDF
Actions you can and should do NOW to get ready for the application:
Get your books in order:
A lot of whether you qualify for a new or a 2nd PPP loan will depend on your business income and payroll expenses. Last year, many business owners struggled to get their payroll records and Income Statement in order in time. Don’t make the same mistake again! Make sure your books and records are in proper order to submit when the time is right.
Have your 2019 tax returns ready:
Businesses will generally need to have their 2019 tax return on hand as well as an Income Statement to show that they’ve had at least one quarter where revenue fell 25% or more.
Get a tax professional:
If you don’t have a trusted accountant or tax professional, find one now. This stuff is complicated. With tens of thousands, and potentially hundreds of thousands at stake, it is worth paying the money to prepare early and get it right. Also, the sooner the better. If you wait until the last minute, that professional may not have the capacity to take you on.
Know which financial institution you will use:
Work with a bank you know and already work with. In the first round, many people without a banking relationship—or who had a relationship with a bank that wasn’t participating—were left out in the cold. Establish your relationship now, so you can be ready when application time comes.
Eligibility to apply for PPP 2.0:
If you have previously received the PPP loan at the first round, you still can apply for the second round. Borrowers are eligible for a second-draw PPP loan if the following criteria are met:
300 or fewer employees.
Revenue (gross receipts) declined over 25% in all or any quarter of 2020 compared with all or part of 2019.
Used or will use the full amount of the first PPP loan on or before the expected date for the second PPP loan.
Maximum loan amount this time is $2 million.
Eligible costs - what you can spend on with the fund:
To get the first and second PPP loans forgiven, borrowers have to use the funds on eligible costs. As with the first round of the PPP, the costs eligible for loan forgiveness in the revised PPP include payroll, rent, covered mortgage interest, and utilities. In addition, the following costs are now eligible:
Covered worker protection and facility modification expenditures, including personal protective equipment, to comply with COVID-19 federal health and safety guidelines.
Covered property damage costs related to property damage and vandalism or looting due to public disturbances in 2020 that were not covered by insurance or other compensation.
Expenditures to suppliers that are essential at the time of purchase to the recipient’s current operations.
Covered operating expenditures, which refer to payments for any business software or cloud computing service that facilitates business operations; product or service delivery; the processing, payment, or tracking of payroll expenses; human resources; sales and billing functions; or accounting or tracking of supplies, inventory, records, and expenses.
One of the important differences for PPP 2.0 is, minority, women-owned businesses will get their first bid on new PPP loans. How does that work? Community lenders serving minority and women-owned businesses will have exclusive access to a new pot of Paycheck Protection Program loans for at least two days when the next round of money becomes available.
If you want to learn more about the rules and guidelines on PPP 2.0, here are the links to the full guidance by SBA:
This guidance includes a commitment from the SBA to make at least the first two days of the PPP application window open exclusively to applications from community financial institutions that serve minority- and women-owned businesses.
2. “Business Loan Program Temporary Changes; Paycheck Protection Program Second Draw Loans”
This guidance lays out the guidelines for new PPP loans to businesses that previously received a PPP loan.
3. “Business Loan Program Temporary Changes; Paycheck Protection Program as Amended”
This guidance consolidates the rules for PPP forgivable loans for first-time borrowers.
