What’s New in the Second Round of PPP

The latest round of COVID-19 relief funding provides $284 billion for another round of the Paycheck Protection Program — often referred to as PPP2.

Here’s what new for PPP2:

• Business owners can now write off expenses they used forgiven PPP loans to pay for.
• Small businesses that saw significant revenue declines greater than 25% in any quarter of 2020 compared to 2019 can get a second PPP loan.
• Borrowers can choose the length of their covered period as long as it’s at least eight weeks but fewer than 24.
• There’s an additional $20 million for the Economic Injury Disaster Loan Program. Also, EIDL advances don’t reduce PPP loan forgiveness. You may need to amend your loan forgiveness document with your financial institution to account for the EIDL changes.
• Live venues, independent movie theaters, and cultural institutions are eligible for funding from a $15 billion fund.
• Section 501(c)(6) not-for-profit organizations (e.g., business leagues, chambers of commerce, real estate boards, boards of trade, etc.) are also eligible for loans for the first time.

PPP2 is available to first-time borrowers as well as those who previously received a PPP loan. However, there are some limits for businesses that already received loans vs. first-time borrowers. For example, businesses that received the first round of PPP loans must:

• Have no more than 300 employees (down from 500) or meet an alternative size standard;
• Have used — or will use — all of their first PPP loan;
• Had gross receipts during Q1, Q2, or Q3 2020 that were at least 25% less than the gross receipts from the same quarter in 2019. If borrowers apply after Jan. 1, 2021, they can use Q4 gross receipts.

The SBA is still requiring businesses applying for loans over $2 million to meet the "necessity test." That requirement means borrowers have to certify that the PPP loan is necessary to support their business’s ongoing operations. It can be a tricky requirement to meet, so make sure to talk to your financial and legal advisors.

For businesses applying for a second PPP loan, they can calculate their max loan amount by multiplying their average total monthly payroll in either:

• The one-year period before the date on which the loan is made or
• Calendar year 2019 multiplied by 2.5.

For hospitality businesses — mostly restaurants and hotels — applying for a second loan, they multiple their payroll by 3.5, though the $2 million limit still applies.

Businesses now have more control over what they use funds for. In addition to payroll, rent, covered mortgage interest, and utilities, businesses can now use PPP loans for:

• Covered operations expenditures, like software or cloud computing services.
• Covered property damage costs related to public disturbances in 2020 that insurance didn’t cover.
• Covered supplier costs that are essential to a business’s operations.
• Covered worker protection expenditures that help a business comply with federal, state, or local government or health guidance or ordinances.

For loans that are less than $150,000, there’s a simpler, one-page certification. Although borrowers will only be asked to self-certify all their information, all of the rules still apply. And there can be severe penalties for making false claims to the SBA.

If you have questions about the latest round of PPP funding, please reach out to us.

This communication is intended to provide general information on legislative COVID-19 relief measures as of the date of this communication and may reference information from reputable sources. Although our firm has made every reasonable effort to ensure that the information provided is accurate, we make no warranties, expressed or implied, on the information provided. As legislative efforts are still ongoing, we expect that there may be additional guidance and clarification from regulators that may modify some of the provisions in this communication. Some of those modifications may be significant. As such, be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed.