PPP Forgiveness Part II

PPP Loans, Round 2

Now that 2021 is finally here, we’re all looking for opportunities to reenergize our businesses.

If the pandemic has negatively affected your bottom line, there’s good news coming from Congress—another round of Paycheck Protection Program loan funding has been established.

If you received a PPP loan previously and need more financial assistance (or even if this is the first time you’ve even heard of a PPP loan), read on. This program was designed to help put your pandemic-related financial challenges in the rearview mirror. If you apply for the loan and use the money per the guidelines, you stand an excellent chance of having the loan forgiven.

PPP Round 2 at a Glance

These loans are available to all businesses with less than 300 employees (whether or not you received a PPP loan previously) and also to Section 501(c)(6) not-for-profit organizations. You must meet these criteria:

First-time borrowers (maximum loan amount $10 million):

  • You have less than 300 employees.

Second-time borrowers (maximum loan amount $2 million):

  • You have less than 300 employees.
  • You experienced a decline in revenue of at least 25% during any quarter of 2020 compared to the same quarter in 2019. If you’re a seasonal employer or weren’t in business in 2019, there are special rules to help you determine if you’re eligible.

How much can you borrow?

The formula is the same as for the last round:

2.5 x your average monthly payroll

Even better—for restaurants, food service businesses, and hotels, the formula is:

3.5 x your average monthly payroll

The Catch?

Yes, there’s always a catch, but the guidelines are straightforward:

  • No matter what your loan amount, you must spend at least 60% of it on payroll (including tips, commissions, bonuses, and hazard pay).
  • If you don’t have traditional payroll because you’re an independent contractor, self-employed, or a sole proprietor, you can use at least 60% of the funds as “Owner Compensation Replacement.”
  • What’s left of the loan (40%) must be spent on other qualified expenses (like rent, company-paid health insurance, mortgage interest on business assets or property, utilities, and things like transportation or computer expenses).
  • You must use all the loan proceeds within a time period not to exceed 24 weeks.

Once you’ve spent the funds, you must apply for loan forgiveness. Here’s a link to a reliable resource to read more about the PPP program.

For more guidance, look to a CPA who can help you apply for the loan and decide how to spend it wisely. If you have questions, we’re here to help.