Paycheck Protection Program (PPP) Update

Paycheck Protection Program (PPP)

On January 8, 2021, the SBA announced that the Paycheck Protection Program (PPP) will re-open the week of January 11, 2021, for new borrowers and some existing PPP borrowers. The initial wave of loans issued on Monday, January 11, and Wednesday, January 13, will only be available to community financial institutions, but the PPP will open up to all eligible lenders shortly after.

SBA has provided information for small business owners looking for a PPP loan, which can be found here.

This round of PPP authorizes loans up to $285 billion toward job retention and certain other expenses through March 31, 2021, and allows certain existing PPP borrowers to apply for a Second Draw PPP Loan. This latest round is more restrictive than the first. Loans will be capped at $2 million. Eligible businesses can have only up to 300 employees and must have experienced at least a 25% drop in sales for at least one quarter compared to the same quarter a year before.

First-time borrowers can receive up to $10 million while the second round of loans is limited to $2 million. Borrowers in the second round must have already spent all the funds they received previously and must have experienced at least a 25% reduction in gross receipts in at least one quarter of 2020 compared to the same period in 2019. Publicly traded companies will not be eligible.

Loan amounts will be forgiven as long as at least 60% was spent on payroll. Additional expenses are now eligible, including amounts spent on personal protective equipment and workplace modifications to comply with COVID-19 safety regulations, as well as property damage due to looting in 2020 that was not covered by insurance.

Capital for Minority, Underserved, Veteran, and Women-Owned Businesses

The Economic Aid Act sets aside funds for new and smaller borrowers, in low- and moderate-income communities. These set-asides include:

Accepting PPP loan applications only from community financial institutions for at least the first two days when the PPP loan portal re-opens
$25B set aside for borrowers with 10 or fewer employees or loans less than $250K in low-income areas

Eligible Paycheck Protection Program expenses now deductible

The new stimulus package also states explicitly that any expenses paid with PPP funds remain deductible, even if the loan is forgiven. This contradicts guidance from the IRS, which stated that such expenses were not deductible. It also requires the SBA to create a simpler one-page forgiveness application for any PPP loans under $150,000.