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Another PPP Loan - Do You Qualify?

At the end of December, legislators released another stimulus bill to help set off the impact that COVID 19 has had on both individuals and small business alike. While many are focused on when their individual stimulus payments will be arriving, there is another round of PPP loans that could be very beneficial to the business that qualify.

On January 11th, SBA opened the banks for first time applicants. Those businesses who did not get the opportunity to apply for loans during the first round of PPP loans were given a few days to apply before anyone else is able to do so. An additional consideration is being made for smaller, community, minority owned banks and allowing them to open loan applications before the larger banks.

As of January 13th, SBA has opened up applications to companies requesting second draw for PPP loans. As with the first round, smaller, community and minority owned banks will be given priority and will open loan applications first. Many larger banks opened up their application portals last week. So now that another round of PPP loans has been approved, what are the qualifications?

First round applicants will face the same requirements as the first round of PPP loans. However, there have been new restrictions on those applying for a second draw. For example, applicants must have less than 300 employees and must prove a financial hardship. Applicants must show a decline of at least 25% in gross receipts from comparable quarters from 2019 to 2020. In addition to showing financial hardship, applicants must provide proof that their first round loans were used appropriately, although it does not have to be forgiven. Applicants are eligible again for 2.5 times their monthly payroll, similar to the first round, but some industries (such as restaurants) are being given the opportunity to apply for 3.5 times their monthly payroll. It does not look like this would apply to any healthcare related organizations.

Just like the first round of PPP loans, this round also provides the opportunity to have the loan forgiven if it is used according to specific terms. At least 60% of the loan must be used for payroll expenses and the remaining amount used on other qualifying expenses such as rent, utilities, and COVID related protective expenses, such as PPE.

The program will be open through the end of March and legislators estimate that with the new restrictions on loans, funds will not run out. In the first round of the PPP loans, funds were depleted within a matter of days, but the SBA is confident that it will not happen again.

For businesses who experienced losses related to COVID during 2020, we recommend applying. Obviously, conditions must be met, but this is another way to cover payroll during an increasingly uncertain time with COVID cases, hospitalizations and deaths on the way.

Nolan Practice Management is here to help through the application process, but we also encourage you to speak with your bank and accounting professionals.

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