January 14, 2021

PPP Update

The Paycheck Protection Program (PPP) with updated eligibility has launched. 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 Second Draw PPP Loans on Wednesday, January 13. Following this, the SBA and Treasury will open the PPP Loan portal to eligible lenders with less than $1 billion in assets for First and Second Draw applications on Friday 1/15 and to all other lenders for First and Second Draw applications starting on Tuesday 1/19.

Please find the SBA’s full Press Release here.

Please note, however, that many lenders are not yet ready to process applications. Despite being ‘allowed’ to begin accepting applications,  the release of information from the SBA to the lenders and technology partners did not occur until last weekend so lenders are understandably still getting fully calibrated. In addition, the origination platform that SBA is utilizing this time around is different from the E-Tran system used for the first round so this needs to be integrated as well. Learning from last round, lenders would rather wait to have their systems be 100% ready to go rather than starting to accept applications when they are still building them. The SBA, supported by many lenders, continues to drive home the point that they feel very confident that there is plenty of money to go around and that businesses should stay calm and not be worried about funds running out.

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 or lending partner 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

– For partnerships – include IRS Form 1065 and Schedule K-1
– For sole proprietors – include IRS Form 1040 Schedule C

  • 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.