The federal government has begun accepting applications for the second round of Payroll Protection Program (PPP) loans. Only businesses with fewer than 20 employees will be allowed to apply during the two weeks starting February 24 through March 10. Larger businesses with up to 300 employees (500 employees if they qualified under PPP1) can apply after March 10. The loan period ends March 31.
The businesses who can receive loans has been expanded to include companies without employees, like sole proprietors, independent contractors, and other self-employed individuals.
Lawful US residents who are not yet citizens but are small business owners and business owners with student loan debt delinquencies are eligible for PPP loans. Local media like newspapers and radio stations can apply.
Businesses are not eligible if their primary purpose is political, if they are listed on a securities exchange, if their owners are Chinese, or if they have permanently closed.
When the first round of the Payroll Protection Program rolled out in April 2020, it was designed to keep businesses afloat during a nationwide shutdown. However, once companies started to reopen, COVID-19 cases increased and we had another economic downturn. The initial allotment of funds couldn’t cover the full extent of business losses. Some large businesses and chains were allowed to claim large amounts of the allocated PPP funds.
The PPP2 loan amount is 2.5 times the average monthly payroll costs in the year prior or 2019 calendar year, except food service providers who receive 3.5 times the average monthly payroll costs. Necessity certification is required. Sba.gov has a necessity questionnaire that must be completed. Companies must show a 25% decrease in revenue from 2019 to 2020 for loans of more than $150,000. Businesses can compare any quarter in 2019 to the same quarter in 2020 to show a loss or use overall revenue reduction.
If a company can document that the loan funds were spent as required, the loan will be forgiven – will not need to be repaid to the government.
Expenses that can be covered by a PPP loan are not limited to payroll. 60% is allowed for payroll and benefits like insurance. 40% may be spent for other costs required by a government entity to comply with COVID restrictions including PPE equipment, property damage, and cloud computing. A portion of the 40% may be used for expenses like rent and utilities.
There are many small businesses in our area that might qualify for a PPP2 loan. If you own one of them, google BBB PPP2 and watch the short video created by the Better Business Bureau. Then talk to your accountant about applying.