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Here’s an overview of the second round of PPP loans for small businesses

Published January 5, 2021

What you need to know about the second draw PPP loans

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. 

What exactly is a PPP loan?

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.

What’s changed with the second PPP loan?

Small business owners are going to welcome many of the changes to the second PPP loans, including:

  • You can deduct the expenses that you use the loans to pay for—just like you would if you were paying for them like usual (with the money you make). That’s a big change from the first PPP, which now also allows expenses to be deducted. In addition, the loan isn’t included in your gross income—that should make a significant difference for small business owners. Also, you can now use the Employee Retention Tax Credit (ERTC) with your PPP.
  • Congress expanded what you can use the loans to pay for, including software and cloud computing—two things that support changes small businesses had to make during the pandemic. So, now you can use PPP loans to add online ordering to your website or create a mobile app for it, install or improve curbside pick-up services and upgrade your POS systems to accept contactless payments. And there are more ways you can use your PPP funds (covered in the last section of this article).
  • For loans less than $150,000, it’s now a lot easier to apply for forgiveness of your PPP small business loans (including your first one). All the information you need to provide for loan forgiveness includes:
       1) The number of employees you were able to keep because of the loan
       2) Assert that you used the funds properly (as set out in the first PPP) and that you provided documentation to support it
       3) List the amount you used specifically on payroll

Are small businesses that received the first PPPs eligible for the second?

Yes, they are, but only by meeting the following requirements:

  • Have 300 or fewer employees
  • Able to prove sustained significant losses totaling 25 percent year on year for any 2020 quarter (year on year means what you made, say, the third quarter of 2020 compared to what you made in the third quarter of 2019)

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:

  • For-profit businesses
  • Most nonprofits
  • Veteran organizations
  • Tribal organizations
  • Agricultural cooperatives
  • Sole proprietors, independent contractors and the self-employed

Ineligible borrowers include:

  • Publicly traded companies
  • Financial services companies that received an initial PPP loan
  • Entities affiliated with the People’s Republic of China
  • Lobbying organizations

What are the loan terms (how much will you receive)?

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.

How to apply and when to expect to receive the loans

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.

What’s covered (what can you spend the loan on)?

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:

  • Operational costs: Software and cloud computing, accounting, tracking supplies, sales and billing, inventory, human resources and records management
  • Safety measures: All of the changes needed to abide by the COVID-19 safety requirements established by national health organizations and state and local governments (particularly to protect employees)
  • Property damage: Property damaged by 2020 social unrest that’s not covered by your insurance or by any other means
  • Supplier costs: What you pay suppliers to help run your business that were under contract before you received the loan or for perishable items (like food) during the covered time period 

NCR VOYIX is continuing its commitment to support small business

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.

Need more information?