PPP The Sequel

Have you heard about the second round of PPP COVID relief?  Do you want to know how it is different (and better) than the first?  Here is what you need to know.

Background

At the end of 2020, Congress passed into law the “word salad” known as The Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Acts.  While there were several facets to this act, I’m going to focus on the second round of PPP funding provided (PPP2) in this posting.  While much of the criteria to receive funding remained the same, Congress made specific changes for PPP2 to resolve problems which came up during the first round of funding concerning the relief not being targeted enough at small business.

What Businesses are Eligible for PPP2?

• Your business must show a greater than 25% decrease in revenues in at least one quarter in 2020 versus the corresponding quarter in 2019. This measurable adverse impact was not included in the first round of PPP funding.
• You must have exhausted (or will exhaust) all of your initial PPP1 funding.
• The same business types qualify for PPP2 as did for PPP1.
• Your business must have been in business on February 15, 2020.
• Your business can not have more than 300 employees. This is a change from the 500 employee limit for PPP1.
• 501(c)(6) non profits are now eligible if you do not have more than 15% of your revenue from lobbying efforts.

What are the new Loan Limits?

• PPP2 has a loan limit of $2 million (and $10 million if combined with PPP1).
• The loan amount is based on 2.5X your average monthly 2019 payroll. This is the same as PPP1.
• For businesses with a NAICS code beginning in 72 (mostly hospitality businesses) this loan limit is increased to 3.5X the average 2019 monthly payroll. This provision directs more relief to those harder hit industries.  Check your tax returns for your NAICS code if you are unsure.

What are the additional Eligible Expenses allowed under PPP2?

• Costs you incurred to protect your workers from COVID-19 are now eligible expenses (Personal Protective Equipment, plexiglass barriers, etc.)
• Group insurance that you provide your employees is an eligible payroll cost.
• Operations Expenses such as software, cloud computing, HR and accounting expense are now eligible expenses.
• Supplier Costs which are essential to your business are now eligible expenses.
• Repair expenses you may have incurred due to public disturbances which are not covered by your insurance are eligible expenses.

What is the time limit for applying for a PPP2 loan?

• You need to apply by March 31, 2021 for a PPP2 loan.
• Relief funds are limited, so apply sooner rather than later.

Summing Up

PPP2 is a much more focused financial relief package than that provided in the original CARES act of 2020.  It targets smaller and more adversely impacted businesses than the original act.  It also addresses many of the questions which arose around PPP1 and the additional expenses that small businesses incurred directly as a result of the COVID-19 pandemic.  This post is not intended to be an exhaustive listing of all the provisions of the December 2020 Act.