Right now, business owners have a lot of questions. In a combined effort with partners in the legislature, legal, and accounting practices we are bringing small businesses much-needed answers as they become available.
Here, we’ve collected the most common questions business owners want to be answered about the PPP right now, and we’ve written up the answers.
How long will it take for PPPr3 to be enacted and go live?
When the Economic Aid Act was passed on December 27th, 2020 the legislation gave SBA 10 days to provide guidance on the new bill. SBA has released new guidance as recently as Wednesday, January 6th, 2021. We expect the program to go live within a week.
To prepare for the opening of this round of Paycheck Protection Program we are suggesting that all businesses pre-apply using the application HERE. Once your pre-application is complete, we will email all businesses with news of the program’s opening and your ability to finish your application.
How do I measure a 25% decrease in revenue or gross receipts?
Businesses may qualify for a second PPP loan by showing a 25% decrease in revenue. According to the latest Interim Final Rule (IFR) on second draw PPP loans revenue is captured using gross receipts. The IFR generally defines gross receipts to include all revenue in whatever form received or accrued (in accordance with the entity’s accounting method) from whatever source, including from the sales of products or services, interest, dividends, rents, royalties, fees, or commissions, reduced by returns and allowances.
A borrower can calculate revenue reduction with gross receipts by taking any one quarter of 2020 and comparing it to the same quarter from 2019. In this case, quarter references a calendar quarter rather than a business or fiscal quarter.
Do I need to apply for forgiveness to take a second PPP loan?
No, if you took a PPP loan in the first round of funding, there is no requirement to apply for PPP forgiveness before applying for a second PPP loan. However, the legislation does state that the business must have used all funds from the first PPP loan or intended to use those funds before they may apply for a second loan. More SBA guidance on intent to use funds may be coming soon.
If my company took the maximum 2.5x payroll in the first round, am I still eligible for a second PPP loan?
Yes, you may still be eligible for a second PPP loan. Because the new Economic Aid Act is focused on supporting hard-hit businesses, you may still qualify for a second PPP loan (known as a 2nd Draw loan). Eligibility for a second PPP loan is based on proving a decrease in business revenue that is greater than or equal to 25% of the business’s gross receipts.
If I am a hotel or restaurant do I automatically qualify for 3.5x payroll?
Yes. The Economic Aid Act has provided for all businesses with a NAICS code starting with 72 to qualify for a loan amount up to 3.5 times payroll.
First draw businesses with NAICS codes beginning in 72 will qualify if they have no more than a total of 500 employees. Second draw businesses with NAICS codes beginning in 72 are eligible if they employ no more than 300 people per location and meet the revenue reduction requirements. Restaurant and hotel locations with a shared parent company that operate as separate legal business entities can apply separately for each entity/location.
Yes, the program will be open for both first-time borrowers and borrowers looking for a second loan. Please note that the requirements for first-time borrowers and second-time borrowers are different. Continue reading below for a non-exhaustive list of eligibility requirements and other helpful information. Please be advised that qualifying as an eligible business does not guarantee a PPP loan will be offered.
Yes, applicants may still apply for a Round B PPP loan through us regardless of receiving a PPP loan from a different lender in the previous round.
Please be advised that only eligible businesses may apply for a second draw loan. Each business is only entitled to one PPP second draw loan, and previous approval does not guarantee approval for a second draw loan.
Second Draw PPP Loans are generally subject to the same terms, conditions and requirements as First Draw PPP Loans. These terms include:
The guarantee percentage is 100 percent.
No collateral will be required.
No personal guarantees will be required.
The interest rate will be 100 basis points or one percent, calculated on a non-compounding, non-adjustable basis.
Maturity is five years.
All loans will be processed by all lenders under delegated authority and lenders will be permitted to rely on certifications of the borrower in order to determine the eligibility of the borrower and the use of loan proceeds.
In addition to the businesses that were eligible in the initial round of PPP (including but not limited to small businesses, nonprofit organizations, veterans organizations, Tribal business concerns, small agricultural cooperatives that meet the SBA size standards, sole proprietors, self-employed individuals or independent contractors), during this round the program includes entities that are 501(c)(6)s, destination marketing organizations (DMOs), housing cooperatives, newspapers, broadcasters, and radio stations. Additionally, for first-time borrowers to qualify for eligibility, the entity may employ no more than 500 employees.
The absolute maximum cap on loans (both first-time applicants and second draw borrowers) for PPP is $2,000,000. In your application, you will be requested to submit certain documentation as proof of eligibility that will determine the amount your business is eligible for under the program. Please be advised that borrowers are not guaranteed the full amount requested in their application.
In addition to the expenses that were eligible under the previous round (payroll, rent, covered mortgage interest, and utilities), both first-time applicants and borrowers applying for a second draw may also use their PPP loan to cover the following expenses: covered operations (software, cloud computing, and other human resources and accounting needs); property damage costs due to public disturbances that occurred during 2020 that are not covered by insurance; covered supplier costs; and covered worker protection expenditures and personal protective equipment (PPE) to help a loan recipient comply with federal, state or local health guidance including requirements issued by the CDC, OSHA, HHS and state or local governments.
Eligible businesses that received a prior loan must:
Have 300 or fewer employees,
Have sustained a 25 percent drop in revenue in any quarter of 2020 when compared to the same quarter in 2019, and
A borrower must have used the full amount of its first PPP loan to apply for a second.
As defined by section 315 of the Economic Aid Act, a borrower is a seasonal employer if it does not operate for more than 7 months in any calendar year or, during the preceding calendar year, it had gross receipts for any 6 months of that year that were not more than 33.33 percent of the gross receipts for the other 6 months of that year. Under section 336 of the Economic Aid Act, a seasonal employer must determine its maximum loan amount for purposes of the PPP by using the employer’s average total monthly payments for payroll for any 12-week period selected by the seasonal employer beginning February 15, 2019, and ending February 15, 2020.
Payroll costs consist of compensation to employees (whose principal place of residence is in the United States) in the form of salary, wages, commissions, or similar compensation; cash tips or the equivalent (based on employer records of past tips or, in the absence of such records, a reasonable, good-faith employer estimate of such tips); payment for vacation, parental, family, medical, or sick leave; an allowance for separation or dismissal; payment for the provision of employee benefits consisting of group health care or group life, disability, vision, or dental insurance, including insurance premiums, and retirement; payment of state and local taxes assessed on the compensation of employees; and for an independent contractor or sole proprietor, wages, commissions, income, or net earnings from self-employment, or similar compensation.
The following businesses are NOT eligible to receive PPP loans:
Entities listed in 13 C.F.R. 120.110 and subsequent regulations except for entities from that regulation which have otherwise been made eligible by statute or guidance, and except for nonprofits and religious organizations;
Entities involved in political and lobbying activities including engaging in advocacy in areas such as public policy or political strategy or otherwise describes itself as a think tank in any public document;
Entities affiliated with entities in the People’s Republic of China;
Registrants under the Foreign Agents Registration Act; and
Entities that receive a grant under the Shuttered Venue Operator Grant program.
Publicly traded companies
If you are interested in applying for a PPP loan, initial or second draw – you can start your application process here – Apply for PPP Loan.
Once you have started the pre-application, you will receive an email confirmation containing a unique link to your application where you will have the opportunity to make changes to the information initially entered, as well as continue the application once the SBA begins to officially process PPP applications on January 11th.
By starting the application now, applications will be automatically signed up to receive email communications once the program is officially open and you will be able to complete your application.
Interested in a PPP Loan? Don’t wait and Apply Now!