Paycheck Protection Program: Let’s Get Some Clarity

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Feeling a little confused about the Paycheck Protection Program? With all the changes we’ve experienced in 2020, especially those that have affected our businesses, it can be difficult to keep track of the details. Read on to learn how the new legislation may impact your ability to receive a PPP loan. 

On December 27, 2020, the Consolidated Appropriations Act 2021 was signed into law. One of the major components of this legislation is the $284 billion allocated for a renewed Paycheck Protection Program (PPP) designed to help small businesses as the COVID-19 pandemic continues. The SBA and U.S. Treasury have issued guidance on the program for both first-time borrowers and for businesses seeking a second loan. This is a tiered roll-out, which gives priority to the smallest and hardest-hit small businesses. We have consolidated this information in order to ensure clarity and hopefully answer any questions you may have.

Second-Draw Paycheck Protection Program Loans: Eligibility & Applications

  • If you already received a Paycheck Protection Program loan the first time around in 2020, you can re-apply for a second-draw loan. You may do so only if you have used the full amount of the first PPP loan on eligible expenses prior to the second loan disbursement date.
  • The renewed PPP is meant for small businesses, so in order to be eligible for the second-draw loan, you must have 300 or fewer employees. You must also show a revenue reduction of 25% or more in at least one quarter of 2020 compared to the same period of 2019. 
  • The maximum amount for second-draw PPP loans is 2.5x average monthly payroll costs, not to exceed $2 million.

Second Draw Application

First-Draw Paycheck Protection Program Loans: Eligibility & Applications

First-draw PPP loans are available to borrowers that were operational on February 15, 2020, and come from one of the following groups:

  • Businesses with 500 or fewer employees that are eligible for other SBA 7(a) loans
  • Sole proprietors, independent contractors, and eligible self-employed individuals
  • Not-for-profits, including churches
  • Accommodation and food services operations with fewer than 500 employees per physical location
  • Sec. 501(c)(6) business leagues
  • News organizations that are majority-owner

The maximum amount for first-draw PPP loans is 2.5x average monthly payroll costs, not to exceed $10 million.

First Draw Application

Important Information

  • At least 60% of the PPP funds must be spent on payroll between 8-24 weeks
  • The PPP funds have a 1% fixed interest rate
  • Expenses paid with PPP funds that are forgiven will be tax-deductible
  • Lenders may not charge a yearly fee or prepayment penalty. There is no collateral or personal guarantee requirement
  • Applications were made available the week of January 11, 2021. The deadline to apply is March 31, 2021 – unless funds are exhausted prior to this date. 
  • The first two days were reserved for community financial institutions that serve minority- and women-owned businesses. Monday is dedicated to first-time borrowers and Wednesday to second-time borrowers. The SBA and Treasury said the PPP would open to all lenders on Tuesday, January 19, 2021.

You may be wondering “What’s Next?” 

Paycheck Protection Program Guidance

Below you will find links for additional information regarding the Paycheck Protection Program.

Disclaimer: This is a high-level overview current as of January 21, 2021.

Keep in mind this information is ever-changing.

PPP Loan Forgiveness FAQ

Program Information

Please do not hesitate to reach out to us with any questions you may have. Satterley Accounting Services’ advisory team remains here for you throughout 2021.