On December 27, the President signed the Consolidated Appropriations Act, 2021 (CAA 2021) which included increased funding for the Paycheck Protection Program and allows for previous borrowers to request a “second draw.” The recently enacted COVID relief bill permits PPP2 loans to be issued immediately.
Keep in touch with your lender to understand when they anticipate accepting applications.
- Targets businesses who experienced a 25% decline in gross revenue in any quarter of 2020 over 2019
- Special rules exist for new businesses; reach out to email@example.com for more information if you need assistance determining if your new business is eligible
- Loan amount of up to 2.5X average monthly payroll costs for 2019 or trailing 12 months (up to $2 million)
- Restaurant / hotels
- Businesses with the NAICS code beginning 72 are eligible for 3.5X average monthly payroll and waived affiliation rules
- 501(c)(6) organizations are newly eligible
- Expands expenses eligible for forgiveness
- Program ends 3/31/2021
Estimates indicate at least 50% of first round PPP borrowers could be eligible for round 2. As a result, we suggest preparing now to ensure you are able to submit as soon as the program begins accepting applications.
In order to be eligible for PPP2 you must:
- Have 300 or fewer employees
- Have used or will use full amount of first PPP loan
- NOTE – some lenders are requiring forgiveness applications be submitted before they will accept an application for PPP2 – reach out to your lender to understand their policy
- Demonstrate at least a 25% reduction in gross receipts in any quarter of 2020 relative to the same quarter in 2019.
We advise creating a schedule to test your receipts on a quarterly basis to confirm you are eligible. See example below where the second quarter confirms eligibility for PPP2.
|Q1||$ 110,000||$ 125,000|
|Q2||$ 92,000||$ 126,000|
|Q3||$ 123,000||$ 136,000|
|Q4||$ 120,000||$ 127,000|
Specific details are not yet available about what documentation will be required to demonstrate eligibility based on a decline in gross revenue. We suggest compiling a quarterly profit and loss, bank statements, sales tax returns and / or other information to prepare for the application. We will keep you updated as we learn more details about what lenders will require.
NOTE: The CAA 2021 relief bill included a special provision to allow borrowers with loans under $150,000 to submit a certification attesting to the require revenue loss. However, those borrowers will be required to provide documentation to support eligibility with the forgiveness application.
After determining eligibility, we suggest following a process similar to and compiling documents based on your first PPP application.
Preparing to apply for PPP2:
- Calculate average monthly payroll costs for 2019 or trailing 12 months including:
- Newly added / clarified Group Life, disability, vision, and dental
- Gross wages
- Health insurance
- Retirement contributions
- State and local tax assessed on compensation
- Include owner compensation based on entity type and 2019 earnings
- Create a summary sheet detailing payroll costs and benefits over the 12 months and the calculation to determine your requested loan amount (2.5X the average monthly payroll costs)
- Compile a file with support documents the lender may require including:
- Payroll reports
- Payroll tax filings
- 2019 year end Payroll reports
- 2019 Schedule C / Schedule K-1/ W-2 for owner compensation
PPP Overview / Refresher:
- Forgivable loans based on 2.5X monthly average payroll costs
- Forgivable amounts are not included in gross income and otherwise eligible expenses are deductible
- interest rate of 1% (CAA 2021 requires interest rate to be non-compounding)
- Maturity of 5 years.
- Loan payments deferred
- No collateral or personal guarantees are required
- No fees charged to lenders or borrowers
- 60% of the loan must be used for eligible payroll costs
Brinker Simpson & Company has a team utilizing the AICPA loan tool to assist our clients in preparing to submit their PPP2 applications. Please reach out to firstname.lastname@example.org if you would like assistance or if you have questions.