On January 11, 2021, the federal government rolled out the new version of the Paycheck Protection Program to further help small businesses survive the COVID-19 crisis. If you’re a small business owner in Nashville looking for funding to support your business, consult your accounting firm immediately to find out if you’re eligible for the program and start the application process.
Here are some of the most important things you should know about this new version of the PPP.
1. There are two types of PPP loans
In the latest round of funding, you can either qualify for a first draw loan of up to $10 million or a second draw loan of up to $2 million. First draw loans are earmarked for businesses who have not received a PPP loan previously, while second draw loans are for those who have received funding from the first round of PPP.
2. The second PPP funding includes additional forgivable expenses
As in the original round, the funding for this round is 100% guaranteed by the government. The second PPP is also forgivable provided the borrower meets all the conditions for forgiveness. If any part of the funding is used as an eligible loan, the interest rate is 1% and maturity is five years.
As with the first PPP funding, for a loan to be forgiven, 60% must be spent on payroll costs and 40% on eligible expenses, including mortgage interest, rent, and utilities.
The list of eligible non-payroll expenses for this round has been expanded to include:
- Payment for business software or cloud computing service acquired to help facilitate business processes, sales and billing, payroll expense tracking, product or service delivery, and so on
- Property loss or damage not covered by insurance, which resulted from vandalism or looting during public disturbances in 2020
- Expenditures for goods that are essential to the operations of the business or were part of a contract or purchase order made within a qualified period
- Expenses made to provide for the protection of workers according to the sanitation, social distancing, and other guidelines set out by health authorities
3. The funding is provided only to eligible entities
To be considered an eligible entity, you have to pass the Necessity Test, which includes the following criteria:
- You have 500 or less employees if you’re a first drawer or 300 or less if you’re a second drawer.
- Your business was in operation as of February 15, 2020.
- Second drawers must show a 25% drop in gross receipts between comparable quarters in 2019 and 2020.
- Second drawers must show they complied with all conditions in using their first round PPP loan.
- The nature of business for all borrowers must fall under the categories laid out for the loan, including independently owned franchises, small accommodation or food services businesses, housing cooperatives, self-employed or independent contractors, and others.
The maximum amount you’re eligible for depends on your salary costs and the type and nature of your business. Consult your CPA about the size of the funding that you can receive.
Sources:
January 6th SBA Regulations Help Solidify PPP And EIDL Changes, Forbes.com
Understand the Updated Paycheck Protection Program – 2021 PPP Loan Guide, Chron.com
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