Second-Round of PPP Loans Now Available

The Paycheck Protection Program (PPP) is back, but this round aims to correct flaws identified in previous versions.

First offered last April as part of the CARES Act in an effort to forestall layoffs associated with the pandemic-induced economic shutdown, the program has allowed more than 5,400 lenders nationwide to issue nearly 5.2 million forgivable loans worth about $523 billion.

But loan data from the Small Business Administration, which runs the PPP, revealed that just 1% of borrowers received more than a quarter of money disbursed. Also, studies revealed that minority-owned businesses were more likely to be hindered than their white counterparts when seeking financial assistance.

The new version of PPP aims to correct those mistakes by prioritizing loans to the smallest of small businesses and first-time users of the program. More than $284 billion is available through March 31. Reserves are set aside for smaller lenders and borrowers and those in low-income areas.

Particularly hard-hit businesses that already received PPP loans will be eligible for a second round of funds. To qualify, a business can have no more than 300 employees, must have used all proceeds of the first PPP loans, and demonstrate at least a 25% reduction in gross revenues between comparable quarters in 2019 and 2020.

The amount of a second PPP loan can be 2.5 times the average monthly payroll, except for hotels and restaurants, which can be 3.5 times. All second-draw PPP loans are capped at $2 million per borrower.

Other program highlights include:

• In addition to payroll and rent, forgivable expenses now include the costs of complying with federal and state health-safety guidelines, such as providing personal protective equipment. Loan money spent on software, cloud computing, and other human resources and accounting needs will also be allowed.
• Expenses paid with the proceeds of PPP loans may still be deducted for income tax purposes even if the loan is forgiven.
• Borrowers can self-select a covered period of between eight and 24 weeks from when the loan was received, rather than having to pick either eight or 24 weeks, and the covered period can extend through March 31.
• Simplified processes for both applications for and forgiveness of PPP loans under $150,000.
• Repeal of the requirement that borrowers must deduct the $10,000 Economic Injury Disaster Loan advance amount from the forgivable amount of the PPP loan.
• $15 billion is dedicated as grants for live venues, museums, independent movie theaters and cultural institutions. The grants are generally available to businesses and nonprofit organizations that have fewer than 500 employees and meet conditions regarding venue size and revenue loss.