Published January 5, 2021
As the pandemic surges again, relief for U.S. small businesses is on its way with a second stimulus package that designates up to $285 billion for a second round of loans under the Paycheck Protection Program (PPP). And, there are some significant changes this go round.
The details of it are packed into more than 5,500 pages—but we’ve pulled out the most important information to continue to support you during this exceptionally challenging time. Let’s dive into what you need to know.
Handled through the Small Business Administration (SBA), the first COVID-19 PPP loans were part of the CARES Act Congress passed in March 2020. So far, more than 5 million small businesses have borrowed more than $525 billion in PPP loans, and they are forgivable if the funds are used only on allowed expenses (which have now changed in the second round of PPPs).
According to the Small Business Administration’s website, the overall goal of the Paycheck Protection Program is to “help businesses keep their workforce employed during the coronavirus (COVID-19) crisis.” And, that’s why 60 percent of the loan needs to go toward payroll expenses. But, the PPP is also intended to help support your small business in general.
Small business owners are going to welcome many of the changes to the second PPP loans, including:
Yes, they are, but only by meeting the following requirements:
One additional priority for the second PPP loans is to support businesses that haven’t received any PPP loans, and particularly for those owned by minorities and women.
Eligible borrowers include:
Ineligible borrowers include:
This time, the loan amount is limited to $2 million, down from $10 million. That said, there’s good news for businesses in the hospitality industry. For most businesses, the maximum amount of a second PPP loan can be determined by multiplying your average 2019 monthly payroll by 2.5. For those in the hospitality industry, an extra month is covered, and the maximum loan amount can be determined by multiplying your average 2019 monthly payroll by 3.5.
The second stimulus package was signed into law Sunday, December 27 and the SBA says it is prepared to get more PPP funds to small businesses as quickly as possible. That process will start with an announcement from the SBA indicating that the application portal has been reopened—which is expected in the next few days. But, you shouldn’t wait for that. Instead, contact a financial institution to get your application and documentation started now.
Like the first round of PPPs, the SBA will provide a list of authorized lenders. If you received the first loan, go with the same provider (it should make the process easier and perhaps quicker). If this is the first PPP you’ll receive, gain access to a list (provided by the SBA) of the eligible lenders in every state.
The 60/40 rule still applies with the second draw PPP—so you’ll need to spend 60 percent of the loan on payroll expenses (any of them—from salaries and tips to employee benefits and state and local taxes associated with compensation). But, as mentioned above, the 40 percent has been expanded to allow spending on more than just mortgage interest, rent and utilities.
Some of the other ways you can spend your loan include:
Hopefully you’re able to use this higher-level second draw PPP loan information to more quickly get the support your business needs during the pandemic. It’s an extension of our support that started months ago, and our dedication goes beyond innovating and delivering technology that simplifies your business and helps you run it end to end.
Ready to get more of the PPP details? The rules may vary for the second draw, but not by much.