After 2 months of ongoing debate and negotiations, congress and the president have passed a second round of the Paycheck Protection Program into law. We at CFOshare read the PPP bill that passed congress December 21st, and here’s an executive summary of what’s in store for the PPP round 2. (Also check out our detailed article and our webinar on the same info):
PPP Round 2: What is the Same
The second round of the paycheck protection program will have many similarities as the first. For example:
- Loans will be forgivable if spent on approved expenses, such as payroll.
- Loan sizes will be based on 2.5 months’ historic payroll.
- SBA 7(a), 504, and micro loan payments will be further deferred, helping cash flows for businesses with these debts.
New Items in PPP Round 2
Fewer businesses will qualify for the second round of PPP funding. Eligible businesses will be limited to:
- Organizations with a 25% reduction in gross receipts for any quarter of 2020
- Organizations with fewer than 300 employees
- No lobbying organizations
- No public companies
- No Chinese owned businesses
There’s some new upside to round 2:
- Supplier costs, facility modifications, property damage costs, and PPE are now forgivable expenses.
- Smaller borrowers (fewer than 10 employees) and underserved communities will receive a special allocation to ensure extra funding.
- Independent live venue operators will receive special funding.
Wins for PPP round 1
Even if you don’t get round 2 funding, there’s some big bonuses for those who got a PPP loan in the first round:
- Business expenses paid with forgiven PPP loans will be tax deductible (solving the problem we highlighted in previous articles.)
- Loans under $150k will have significantly simpler forgiveness process.
How does the new PPP round affect my business?
Here’s what CFOshare is recommending to our clients:
- Determine if you qualify for the new round of funding by evaluating your year-over-year quarterly gross receipts. You need at least one quarter with 25% reductions.
- Wait to apply for forgiveness until the new forms are out. With so many changes to the program, you’ll want to wait to give the SBA and your lender time to incorporate those changes.
Not sure what the next step is for your business? Check out our webinars about PPP forgiveness and PPP round 2, or contact one of our fractional CFOs to discuss your business’ specifics.