11
March
Another calendar year into the COVID-19 pandemic, the Payment Protection Program (PPP) stimulus initiative is accepting Second Draw loan applications until March 31, 2021. [1]
Some things have remained the same: as with the initial administration, loan amounts are based on payroll expenses, and the covered period is eight to twenty-four weeks. Other elements of the program, however, are different.
Small Business Focus
The change to the program that most clearly reflects a lesson from 2020 is that a specific pool of $25 billion is reserved for borrowers with a maximum of ten employees or for companies from low- to moderate-income neighborhoods requesting loans of $250,000 or less. The lesson learned here? Focus on small businesses: in 2020 when many large, publicly-held companies received PPP loans, small business were left in the cold.
The Second Draw also assists smaller businesses by expanding the categories of expenses that can be paid for with loan proceeds. In addition to payroll costs, benefits, mortgage interest, rent and utilities, 2021 PPP loans also apply to:
- Worker protection costs related to Covid-19
- Uninsured property damage costs caused by looting or vandalism during 2020
There are also more generous loan amounts available to companies in the hospitality and food service industries. The maximum loan amount in these businesses is 3.5x the payroll expense compared to 2.5x for other businesses.
Loan Forgiveness
To receive full loan forgiveness for Second Draw loans, during the 8-24 week period after receipt of funds, the employer of a small business must:
- Maintain employee and compensation levels in the same manner as required for the First Draw PPP loan.
- Spend loan proceeds on payroll costs and other eligible expenses; and
- Spend at least 60 percent of the proceeds on payroll costs.
And if you are within your grace period for last year’s PPP round and haven’t filed for forgiveness yet, now may be a good time to do so. Give us a call or stop by our website; we are more than happy to help.
[1] To be eligible for a Second Draw PPP Loan, a borrower must (i) have received a previous PPP Loan, and will use or has used the full amount for authorized purposes, (ii) have less than 300 employees, and (iii) demonstrate at least a 25 percent reduction in gross receipts between comparable quarters in 2019 and 2020. Companies that received PPP loans last year can apply for Second Draw loans.