New Round of PPP loans begins
The New Covid Relief package (the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act or “Economic Aid Act”) signed into law on December 27, 2020s begins rolling out today. Included in this package is more than $284 billion for first and second forgivable relief loans. This new agreement expands eligibility for the PPP to more business and provides grants through the Small Business Administration. Notably, in an attempt to give priority to underserved businesses (including businesses owned by minorities, women, and veterans) the loan portal will only accept loan applications from community financial institutions for the first two days. Loans are also capped at $2 million and have fixed many of the unintended tax issues that plagued the first round of loans.
The Second round of relief is available to businesses, self-employed persons, contractors, housing cooperatives, small agricultural cooperatives, veterans’ organizations, tribal businesses and sole proprietorships.
—300 employees or less (reduced from 500 from the first round)
—The business can demonstrate a 25% or more decline in annual gross receipts or for any quarter of 2020, compared to the same 2019 quarter.
—Only businesses that are a going concern and have not permanently closed are eligible for the loans. Temporary closures are still allowed.
Applicants may receive up to 2.5 times their average monthly payroll costs which may be calculated using either the 12 month prior to the loan, the 2019 calendar year or the 2020 calendar year. There are additional metrics for seasonal and new businesses and hotels and restaurant and food related businesses may eligible for greater relief packages based on number of locations.
These loans are forgivable is the business can demonstrate that at least 60% of the loan was used to cover payroll expenses, with the balance being used for any or all of the following: operating costs, property damage not covered by insurance and sustained by protests or unrest, payments to cover contracts taken prior to the date of the loan application, PPP and health and safety measures.
The paperwork for this second round is significantly reduced if you are applying for $150,000 or less and applications are through the same lender as round 1.
Notably, the new law provides for $15 billion in grant money, that do not require repayment for live entertainment venues including theaters, museums, and zoos; some of the hardest hit businesses as a result of the pandemic.
Contact your local lender ASAP to begin your loan application, as we all hold our breath for a healthier and more profitable 2021.