The Consolidated Appropriations Act of 2021 (Act) was signed into law on December 27, 2020 and included $284 billion for a second round of the Paycheck Protection Program (PPP2). This will provide struggling businesses access to much needed cash to continue operations.
The new bill has made several key changes which make it easier to apply for and use a PPP loan.
- First-time loan recipients and second-time PPP borrowers are eligible for funding.
- Restaurant and hospitality businesses can borrow 3.5x average monthly payroll costs
- You can now spend your PPP loan on a wider range of qualified expenses.
- Applying for forgiveness for loans under $150K is now simpler.
- Application period is open now and ends March 31, 2021 (Senate passed extension to May 31, 2021 and we expect this will quickly be signed into law).
Eligibility for a PPP2 Loan:
- First Draw
- Must have less than 500 full-time, part-time, or seasonal employees.
- Business was in operation before February 15, 2020.
- Business is still open and operational.
- Must certify that the loan is required to sustain operations.
- Second Draw
- Must have less than 300 full-time, part-time or seasonal employees.
- Must have reduction of gross receipts at least 25% in the any quarter of 2020 (when compared with the same quarter in 2019).
- Must have used, or will use, the full amount of the first PPP loan received before funding can be received for a second loan.
- Business was in operation before February 15, 2020.
- Business is still open and operational.
- Must certify that the loan is required to sustain operations.
Loan Calculation:
- First Draw
- 2.5x average monthly payroll costs
- $10 million maximum loan amount
- Second Draw
- 2.5x average monthly payroll costs
- 3.5x average monthly payroll costs for hospitality industries (NAICS 72)
- $2 million maximum loan amount
Expansion of Eligible Expenses:
The initial PPP program allowed recipients to spend loan proceeds on payroll costs, rent, interest, and utilities.
PPP2 has expanded the eligible uses:
- Supplier costs that were already under contract
- Modifications for COVID safety
- Covered Operations
- Software and adaptations toward a remote workforce.
- Expansion of real property to indoor/outdoor facilities.
- Repairs/restoration due to damages caused by “public disturbances” during 2020 that were not covered by insurance.
- Accounting costs.
- 60% payroll threshold still applies.
Streamlined Forgiveness:
There is a streamlined one-page application for forgiveness available for loans of $150,000 or less.
Wheeler Accountants is here to support businesses and nonprofits navigate the various credits and loans available in the latest round of stimulus to maximize all opportunities in these uncertain times.