The Bipartisan Emergency COVID Relief Act of 2020 has been summarized outlining $300 billion to the Small Business Administration. When passed, funding will allow the hardest-hit small businesses to receive a second forgivable Paycheck Protection Program (PPP) loan and other businesses to receive a first one.
Appropriately planning your uses of funds for the next round so you can be eligible for loan forgiveness is key.
Here’s what the SmartBiz® team currently knows now about what may be enacted soon and how you can prepare.
The current discussions include an opportunity for previous borrowers to get a second PPP loan if their revenue decline meets certain thresholds, currently pegged at 30%. Also, the maximum loan size in this round of up to $2 million, would equal 2.5 times the average total monthly payroll costs plus up to $50,000 for covered worker protection expenditures incurred or paid by the eligible recipient during the period beginning March 1, 2020 and ending on the date of enactment of the Act. PPP funds in this anticipated round would be forgivable if certain criteria are met (see below).
Forgivable expenses would include covered supplier costs, covered worker protection expenditures, and covered operations expenditures.
The second round of funding is also expected to establish a grant program to support shuttered live venues and theaters that have experienced significant revenue losses.
To be eligible for PPP loans in this next round, small businesses would need to fit the following parameters:
The proposal in discussion includes set-asides for:
Details include:
Forgiveness is one of the big draws of a PPP loan. Even in the next round, businesses would still need to meet the 60/40 cost allocation for payroll and nonpayroll costs to be eligible to receive full forgiveness.
Forgivable expenses would be expanded – from payroll costs, mortgage, or qualified interest, rent, and utilities – to also include certain covered supplier costs, worker protection expenditures, and operations expenditures.
As in the first round, borrowers in this next round would be allowed to select a loan forgiveness covered period between eight and 24 weeks during which to spend loan proceeds on forgivable costs.
The new legislation also outlines how this bill will affect SBA 7(a) funding:
The SBA issued a simplified forgiveness application in October 2020 for loans of $50,000 or less. Details can be found on the SmartBiz Small Business Blog here: New Paycheck Protection Program Loan Forgiveness and Repayment Rules.
The new forgiveness application for forgiveness of loans up to $150,000. (However, it also strengthens SBA’s ability to audit and review forgiven loans, with $50 million appropriated for that purpose.)
Borrowers that also received SBA Economic Injury Disaster Loan Advances would no longer need to subtract such advances from their PPP forgiveness.
According to the current proposal, this next PPP round would also:
As you prepare for the next stimulus package, consider gathering the requested documents and submitting swiftly. PPP funds are not endless and are expected to run out rapidly.
Here are documents that may be needed to establish eligibility. Keep them organized and ready to upload.
Uploading documents is faster, more reliable, and easier to track. Cloud software can help.
It’s a best practice to work with your bookkeeper, or ideally a small business accountant, to help determine loan amount needed, gather documents, and plan to meet forgiveness requirements by the deadline (TBD).
Although going to your local bank is a good idea, you can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating.
You can also work with a FinTech company, like SmartBiz Loans®, to help you apply for PPP funding. Although the next round PPP application is not available yet, you can sign up to download your PPP Prep List and get alerted when you can start the PPP application through SmartBiz.
SmartBiz Loans has successfully guided business owners through the first round of the PPP program and is in an excellent position to help with this next round. Our streamlined application will help you calculate the allowable loan amount for based on your payroll. Our seasoned professionals are on hand to help guide you through the PPP loan application process with participating banks on our platform.