Paycheck Protection Program: Round 2 for Small Businesses
On Tuesday, December 1, a group of lawmakers revealed the framework for a $908 billion COVID economic relief plan (Senate “Gang of 8” Proposal), which designates $300 billion for support of small businesses, including additional Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL) loans. In addition, the package contains provisions for a simplified forgiveness process for PPP loans of $150,000 or less, and allows expenses paid with PPP funds to be deductible. The package is gaining support from congressional Democrats and Republicans, which has renewed hope that a package will be passed before the end of the year, perhaps on or before December 18.
Lawmakers indicated that the $300 billion earmarked for small businesses will be geared toward assisting small companies that can demonstrate economic hardship. Specifically, the new plan contains another round of funding under the Paycheck Protection Program (PPP2) for borrowers that have exhausted the first round of funds. It also expands forgivable expenses to include supplier costs and investments in facility modifications and personal protective equipment in order to operate safely. The first round of PPP loans provided only two-and-a-half months of covered costs, and we are now more than eight months out from the initial rollout of the program. Economic necessity will be a factor in qualifying for an additional PPP loan, and borrowers will be required to demonstrate declines in revenue to qualify.
The new round of PPP funding will have a framework similar to the first round, and loan amounts will again be based on 2.5 months of payroll costs. The maximum loan amount will be $2 million, allowable expenses will be similar to the first round with the addition of safety expenditures, and the 60%/40% allocation between payroll and non-payroll costs will be required for full forgiveness.
Businesses seeking a PPP2 loan should be proactive in gathering financial data to support economic need for additional funding. Comparative financial reports that reveal a significant revenue reduction (at least 30% in any quarter of 2020), number of employees (businesses with 300 or fewer employees will be eligible for this round), current operating expense levels, and timing of the exhaustion of initial PPP funds are examples of the data businesses can begin to compile in advance of the opening of the application process.
While very little information is available regarding details of the Senate Gang of 8 Proposal, if it passes in the next week or two, it will likely be implemented very quickly. Therefore, businesses that believe they may be eligible for a PPP2 loan should begin to prepare and gather their documentation now in order to expedite the application process in this second round.
Coronavirus Resource Center
Have more questions about the impact of the coronavirus on your business? Visit Marcum’s Coronavirus Resource Center for up-to-date information.