• Retirement and Annuity Advisor Jennifer Lang

Plan Now for a Potential Second-Round PPP Funding


The Bipartisan Emergency COVID Relief Act of 2020 has been summarized outlining $300 billion to the Small Business Administration. When passed, funding will allow the hardest-hit small businesses to receive a second forgivable Paycheck Protection Program (PPP) loan and other businesses to receive a first one.


Appropriately planning your uses of funds for the next round so you can be eligible for loan forgiveness is key.


Here’s what we currently know now about what may be enacted soon and how you can prepare.

You may be eligible for a second PPP Loan

The current discussions include an opportunity for previous borrowers to get a second PPP loan if their revenue decline meets certain thresholds, currently pegged at 30%. Also, the maximum loan size in this round of up to $2 million, would equal 2.5 times the average total monthly payroll costs plus up to $50,000 for covered worker protection expenditures incurred or paid by the eligible recipient during the period beginning March 1, 2020 and ending on the date of enactment of the Act. PPP funds in this anticipated round would be forgivable if certain criteria are met (see below).

PPP improvements

Forgivable expenses would include covered supplier costs, covered worker protection expenditures, and covered operations expenditures.

  • Allows business owners to select a loan forgiveness covered period between 8 weeks and 24 weeks during which to spend loan proceeds on forgivable costs.

  • Provides Farm Credit System Institutions with greater certainty and equity in PPP lending participation

  • Defines “seasonal employer”

  • Eliminates the requirement that EIDL advances be subtracted from PPP forgiveness

  • Establishes a procedure in the bankruptcy process if the Administrator determines certain companies in Chapter 11 are eligible for PPP loans.

Support for venues

The second round of funding is also expected to establish a grant program to support shuttered live venues and theaters that have experienced significant revenue losses.

Eligibility

To be eligible for PPP loans in this next round, small businesses would need to fit the following parameters:

  • Meet the applicable SBA revenue size standard

  • Includes support for first-time PPP borrowers with 10 or fewer employees, second time PPP borrowers with 10 or fewer employees, first time PPP borrowers who have been made newly eligible, and second time returning PPP borrowers. Additionally, there would be a set-aside for loans made by community lenders.

  • Have no more than 300 employees (down from 500 in the first round)

  • Borrowers must show a 25 percent decline in revenue in the first, second, or third quarter in 2020 as compared to the same quarter in 2019 (if the loan application is after December 31, 2020, then a fourth quarter comparison may be used as well)


The proposal in discussion includes set-asides for:

  • First-time PPP borrowers with 10 or fewer employees

  • Second-time PPP borrowers with 10 or fewer employees

  • First-time PPP borrowers who have been made newly eligible

  • Second-time returning PPP borrowers

  • Loans made by community lenders

Details include:

  • Eligibility would be limited to small businesses with 300 or fewer employees that have sustained a 30% revenue loss in any quarter of 2020

  • Small 501 c6 organizations that are not lobbying organizations and that have 150 employees or fewer, such as local chambers of commerce, economic development organizations, and tourism offices, would become eligible for PPP

  • Forgivable expenses are expanded to include supplier costs and investments in facility modifications and personal protective equipment to operate safely

  • Business expenses paid for with the proceeds of PPP loans are tax deductible, consistent with Congressional intent in the CARES Act

  • Loan forgiveness process is simplified for borrowers with PPP loans of $150,000 or less.

  • Set-asides are included to ensure that smaller borrowers and underserved communities get the help they need, such as: for small businesses with 10 or fewer employees; for loans made by small community lenders, including Community Development Financial Institutions (CDFIs), credit unions, small community banks, Minority Depository Institutions (MDIs), and farm service lenders; and for the Minority Business Development Agency

  • Funding for independent live venue operators affected by COVID-19 stay-at-home orders

PPP forgive