Second Round of PPP Loans Available Soon
On December 27, 2020, President Trump signed into law a new $900 billion COVID-19 relief and stimulus package, titled the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act (the "Act"). Among its provisions, $284 billion to extend the Paycheck Protection Program (PPP). The Act gives the Small Business Administration 10 days to implement new rules for the extended PPP, so specific rules should be forthcoming in early January 2021.
Some specifics of the extended PPP:
- Small businesses that obtained a PPP loan in 2020 may qualify for a second, forgivable PPP loan;
- Eligibility for this round of PPP loans is more strict, as a borrower must:
- Have fewer than 300 employees (previously 500);
- Show a 25% drop in gross revenue during a quarter in 2020 compared with the same quarter in 2019;
- The Act caps PPP loans at $2 million (previously $10 million);
- Like before, the maximum PPP loan will be 2.5 times an employer's average monthly payroll. However, applicants in the restaurant and hospitality businesses may multiply those costs by 3.5 times;
- At least 60% of the funds must be spent on payroll over an 8 or 24 week period to receive full forgiveness;
- The other 40% may be used on eligible costs – rent, mortgage interest, and utility payments – in addition to expenditures for personal protective equipment and other sanitation expenses, along with cloud computing or remote-work software, and property damage due to public disturbances that occurred during 2020.
- Loans must be necessary to support the ongoing operations of the business.
The Act earmarks funds for both first- and second-time borrowers with 10 or fewer employees and loans of less than $250,000 in low-income areas. Grants are also available for live venue operators, such as theaters and live performing arts organizations, along with $10,000 EIDL advances.
Applicants should contact their lender for additional information on applying for and obtaining a PPP loan.