PPP Opening Today for First Draw Loans
The Paycheck Protection Program (PPP) with updated eligibility launches today. According to the SBA: To promote access to capital, initially, only community financial institutions will be able to make a First Draw PPP Loans on Monday, January 11 and Secondd Draw PPP Loans on Wednesday, January 13. The PPP will open to all participating lenders shortly thereafter.
Please find the SBA’s full Press Release here.
As in the first round, the PPP loan is a fully forgivable loan if spent on qualifying expenditures such as payroll and rent. The loan can be a maximum amount of 2.5 times monthly payroll costs (3.5 times payroll if you have a hospitality business).
Key points in the new PPP legislation:
Streamlined forgiveness process for existing and new loans of under $150,000.
A business CAN apply for a second loan under the new program. To qualify, businesses must have fewer than 300 employees and demonstrate at least a 25% decrease in revenues (substantiated by a quarter to quarter or an annual comparison between 2019 and 2020). Second loans are capped at $2 million. The business has or will use the full amount of it’s previously received First Draw PPP Loan only for authorized uses.
60% of loan proceeds must go toward payroll costs, the other 40% can go toward rent and utilities. The new legislation expands forgivable expenses to include expenditures for personal protective equipment and other gear to protect workers, increased supplier costs and other operations expenditures.
Expenses covered by PPP loans may be deducted from taxes.
$9 billion in funds for Community Development Financing Institutions.
$15 billion for restaurants, theatres and venues.
$12 billion carve-out for very small businesses and those in underserved and minority communities.
$20 billion carve-out for businesses in low-income communities.
What can you do right now?
If you have not yet received a PPP loan and are working with a Community Development Financial Institution (CDFI) as your lender, apply now!
Otherwise, contact your bank to see if they will be participating in this next round, and let them know you are interested in applying. If you got PPP in the previous round, it may be helpful to apply with the same lender but it is not a requirement, you can apply with a different lender for the upcoming round. If you are looking for a lender for this round of PPP- let us know.
You can also start preparing your documents and taking a look at your 2019 and 2020 financials. Each lender may have different requirements, but you can begin collecting some commonly required documents, including:
- Copy of Photo ID for all owners who own 20% of the business or more
- 2019 and 2020 Profit and Loss Statements to show revenue loss during 2020
- 2019 Business Tax Returns
- Articles of Incorporation / Business Organizational Documents
- Payroll Reports with a list of gross wages, paid time off, and taxes assessed for all employees for all 12 months of 2020
- 2020 Employer IRS Documents (including one of the following for all 4 quarters of 2020):
– Form 941: Employer’s Quarterly Federal Tax Return
– Form 944: Employer’s Annual Federal Tax Return (for smallest employers)
– Form 940: Employer’s Annual Federal Unemployment (FUTA) Tax Return
– Form W-3: Transmittal of Wage and Tax Statements
- Documentation to support Health Insurance and Retirement expenses incurred as a part of payroll expenses (for example: a statement from insurance or retirement company).
For previous PPP loans, if you have a loan under $150,000 wait for your lender to finalize their forgiveness procedures, it’s likely going to get easier for you.
We will keep you posted as we learn more!
If you have any questions please contact Natalie Vichnevsky.