How to Get a 2nd PPP Loan for Small Business Pandemic Relief

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  • The Senate approved a PPP extension, giving troubled entrepreneurs an additional two months to apply for an exemption.
  • Now the bill goes to President Joe Biden to be signed.
  • Here’s what small business owners need to know about the PPP loan process.
  • Visit Business Insider’s home page for more stories.

The Senate passed a bill extending the deadline for applying for a Paycheck Protection Program loan, days before the current March 31 deadline. Now the bill goes to President Joe Biden to be signed.

The legislation gives entrepreneurs until May 31 to apply for the PPP, a forgivable loan intended to help entrepreneurs affected by the pandemic. In addition, the Small Business Administration has until June 30 to process the applications.

The extension comes three months after Congress passed a $900 Billion Incentive Agreement, including $325 billion for small businesses and a continuation of the PPP.

While the stimulus package will save some companies, it will come too late for others. Yelp Estimated in September that nearly 100,000 businesses had been permanently closed since the start of the pandemic.

β€œMany small businesses have closed their doors and this loan will not reopen them,” said Henrietta Treyz, director of economic policy at investment research firm Veda Partners.

Here’s what small business owners need to know.

Eligibility Changes

The new stimulus package includes a number of changes to eligibility for PPP loans.

Eligible entities now include corporations, some nonprofits, veterans’ organizations, tribal businesses, housing cooperatives, the self-employed, sole proprietors, independent contractors, news organizations, and small agricultural cooperatives.

“This eligibility approach is much more focused on small businesses compared to the first round β€” in which many large public companies participated,” Ott said. “Hopefully this means more smaller businesses in dire need will get the money they need to survive.”

Nonprofit organizations seeking a second PPP loan must have 300 employees or fewer and cannot be professional sports leagues or organizations that promote or participate in political activity. The new package also includes rules for organizations that participate in lobbying activities or receive receipts from lobbying activities.

Companies or organizations that were not yet open on 15 February 2020 and listed companies are not eligible to apply for a PPP loan.

Previous PPP borrowers can apply for the second draw as long as they have 300 or fewer employees and can demonstrate a gross revenue reduction of at least 25% in Q1 2020 compared to the same period in 2019. alternative calculations for seasonal companies and companies have started after 2019.

The original PPP allowed eligible entities to have up to 500 employees, and it wasn’t required to show losses β€” meaning lawmakers in this new round are aiming to help smaller businesses along with those that have been hit the hardest by the pandemic. affected.

Most borrowers can receive up to 2.5 times their average monthly payroll, but those in the lodging or hospitality industry can receive up to 3.5 times that amount. But loans cannot exceed $2 million.

Special provisions for service companies

The bill includes: $15 billion in support for live music venues and cultural institutions, who have suffered greatly as a result of the pandemic. In addition, companies in the food service and accommodation sector can borrow more; relevant companies can receive up to 3.5 times their average monthly payroll instead of the typical 2.5 times.

“There is an inordinate amount of focus on the service sector that has been devastated and will not be back until there is a vaccine,” Treyz said.

Senate Republicans contained an obscure provision allowing taxpayers to deduct 100% of the cost of restaurant business meals through the end of the year, a 50% increase. While some might see the tax break as another way to support the restaurant industry by incentivizing customers, it’s often used by business executives and has been referred to as the “three martini lunch deduction,” said founder Robert Greenstein. and chairman of the Center for Budget and Policy Priorities.

Finally, $10 billion in funding will go to childcare providers. Most of the money goes to the Block subsidy for childcare and development, which provides federal funding to states for childcare subsidies for low-income families and children under 13. Relevant businesses can use this funding to pay payroll, purchase sanitizers, or cover fixed costs such as rent.

Prioritizing disadvantaged entrepreneurs

Some specifications in the new stimulus bill reflect pain points from the first two rounds of aid – for example that: women and minority-run businesses do not receive as much support as other companies. Smaller businesses with no solid relationships with banks and borrowers in low-income communities struggled to secure financing in the early stages.

The new package Allocates $40 Billion in PPP Funding for businesses with 10 or fewer employees and for those in low- to middle-income neighborhoods, capped at $250,000 per business entity. The SBA’s Guidelines indicate that at least 25% of the set-aside goes to one of the two groups.

Of the PPP funding targeted to these groups, $15 billion will be accessible through community financial institutions and another $15 billion through insured depositories,

credit unions
, and institutions for the agricultural credit system. These lenders are required to channel PPP loans to minority-run businesses and companies that may not have relationships with traditional lenders.

The SBA said: that to further ensure that aid reaches minority, disadvantaged, experienced and female entrepreneurs would accept applications from community financial institutions only for at least the first two days when the PPP loan portal reopens.

An additional $20 billion in disaster relief loans will be allocated to struggling businesses in low-income communities. The EIDL Advance Scholarships are limited to $10,000.

More flexibility on how you spend the money and what is forgiven

This time, companies seeking waiver of their PPP loans have more options to use the money.

Borrowers must still spend at least 60% of the money on the payroll to qualify for a full waiver, while the remaining 40% can be used for permitted expenses such as rent, utilities, personal protective equipment, and property damage that may have occurred during public unrest in 2020.

“This is important for small business owners,” Ott said, “because they can use the money for critical operational costs to keep afloat.”

While the CARES Act allowed companies to use PPP funds as they saw fit, forgiveness depended on using the money for payroll, rent or utilities – otherwise the loan would be repaid at the end of the term.

Tax breaks and credits

According to Dean Zerbe, Alliantgroup’s national director and former senior adviser to the Senate Finance Committee, the new bill expands several critical incentives for U.S. small businesses.

One of the biggest changes was the increase in employee retention credit, which encourages companies to keep people on payroll, from 50% to 70% of pay. And instead of a maximum credit of $10,000 per employee per year, there is a maximum credit of $10,000 per employee per quarter.

“They have another round of checks in the air, but essentially nothing beats keeping someone on the payroll,” Zerbe said.

Other tax provisions include making the 179D credit permanent, which encourages green building initiatives in architecture, engineering and construction; Allowing PPP recipients to receive the research and development credit instead of having to choose one over the other; and encouraging companies to hire people with barriers to employment, such as veterans, benefit recipients and previously incarcerated people for the job opportunity tax credit.

Entrepreneurs are not taxed on PPP funds and EIDL grants received, and they may deduct eligible expenses paid with these funds. “This means entrepreneurs will avoid a higher tax bill and ultimately retain more of the value of stimulus funds,” Ott said.

The bill retroactively eliminates the requirement for companies to deduct their EIDL grant from their total PPP forgiveness, which could lower their tax bill and help them retain more of the stimulus funds.

In addition, the stimulus package will roll over or make permanent certain temporary tax breaks. For example, a tax rebate for distillers, brewers and winemakers will be made permanent, Treyz said. Since this tax is based on the amount of spirits produced, the tax benefit benefits smaller distilleries that produce much less than large companies.

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