10 Common Questions about PPP Loans

How did we get Here?

On December 21, 2020, Congress passed the new COVID relief bill called the “Economic Aid to Hard-Hit Small Businesses, Non-Profits, and Venues Act.” Shortly thereafter the bill was signed into law. On January 6, 2021, the Treasury Department and the Small Business Association issued written rules governing the new rounds of the “paycheck protection program” funding (or “PPP”) contained within the new bill and released forms for applying for PPP loans.

Because the PPP’s purpose is to help smaller and harder hit businesses stay afloat, the second round of funding has more restrictive qualifications that small business owners must meet.

The expansion of the PPP program was something our firm lobbied Congress to do to allow additional funding for struggling businesses. As a result of our efforts, there is now approximately $285 billion available in PPP funding. Our attorneys at Weaver, Bennett & Bland are here to help your business navigate the restrictions and qualifications.

Who Qualifies for Round 2 for PPP?

There are four main qualifiers that your business should be aware of and meet to be eligible for round two of the paycheck protection program loan.

First, your business must have 300 or fewer employees. If you have more than one location, you may have 300 or fewer employees per location.

Second, your business must have already used, or will use, all previously received PPP funds before receiving the second round of PPP funds.

Third, your business must have had a 25% decline in “gross receipts” for any calendar quarter in 2020, when compared to the same quarter in 2019. “Gross receipts” include sales of products or services, rent, royalties, fees, and commissions, to name a few.

Alternatively, you can compare all of 2020 to all of 2019 to illustrate a decline. Fourth, any previously received PPP or EIDL funds are not included in “gross receipts.”

Who Does Not Qualify?

Your business is ineligible for PPP if your business has permanently closed; was not operating by February 15, 2020; received “shuttered venue operator grants;” is a publicly traded business; is a lobbying organization; or is in bankruptcy.

How Much Money can my Business Receive?

All PPP loan amounts are capped at $2 million. For non-restaurant and non-hotel businesses, you may receive 2.5 times your average monthly payroll costs for the previous calendar year or the 1-year period before the loan’s application.

For restaurant and hotel businesses (NAICS code beginning with “72”), you may receive 3.5 times the average monthly payroll costs for the previous calendar year or the 1-year period before the loan’s application.

What if my Business did not Receive PPP Round 1?

There is still funding available for your business, however the qualifications are a bit different. To be eligible, your business must have 500 or fewer employees.

Sole proprietors, independent contractors, self-employed individuals, non-profits, some news organizations, and churches are eligible.

Additionally, if your business is a 501(c)(6) organization you are eligible if you have 300 or fewer employees.

What forms are Required to Apply?

For loans up to $150,000 a simple sworn certification is required. The sworn certification represents that you have not already received a second round of PPP at the time you submit the application; you experienced at least a 25% reduction in gross receipts; you have used the first round of PPP funding only for relevant expenses; and you’re not otherwise ineligible.

For loans greater than $150,000 tax returns, financial statements and/or bank statements, payroll records, and a sworn certification are required.

What are the Terms of PPP Loan Forgiveness?

Remember, the PPP funding is a loan unless it is forgiven. If your loan is not forgiven, the loan terms are 1% APR for 2 years, based on former Treasury Department guidance.

To have your loan forgiven, you must spend it on eligible expenses during the “covered period.” For example, some of the expenses that are subject to forgiveness include payroll costs; rent; utility payments; personal protective equipment purchased to comply with federal, state, and local laws; operation costs, like software, cloud computing, and HR/accounting expenses.

Remember, for forgiveness, PPP borrowers must have a 60/40 split on the use of the PPP funds. This means that at least 60% of the funding must be used for payroll expenses and a maximum of 40% used for all non-payroll expenses.

Your lender can help provide you with the loan forgiveness applications.

What is a “Cover Period”?

Your cover period is any period between 8 and 24 weeks. You choose your own cover period, during which you spend the PPP funding.

This is different that the first round of PPP funding, where you had to choose either an 8-week or a 24-week period. Now, with the second round of PPP loans, you can start planning for how you will use your PPP funding.

How do I get the PPP Loan?

As with the first round of PPP loans, you apply for the load through a private PPP lender. Most traditional banks, like Bank of America, Chase, and Wells Fargo, are participating in the program. Additionally, many start-up lenders, like Kabbage, PayPal, and Intuit, are also participating.

If you already applied through a lender for the first round of PPP loans, then consider using the same lender for round two. Doing this will simplify the process.

For example, if you already gave your first lender your 2019 payroll information to support the first round of PPP funding, you won’t need to give them this information again when you apply for round two.

What Deadlines are Important?

From January 11, 2021 through January 15, 2021, applications are accepted from banks. March 31, 2021, however, is the deadline to apply for the first round or second round of PPP.

Do you have more questions about your business’s eligibility, required forms, deadlines, loan forgiveness requirements, EIDL Grants, or Shuttered Venue Grants? Contact our team at Weaver, Bennett & Bland, P.A. for answers.