Alright, so we know a fresh round of PPP funds, by the tune of billions, should be here at any moment.
But, we’ve noticed something; there’s still a ton of questions and confusion surrounding the new Paycheck Protection Program. Questions like:
- If I got it last time, can I get it again?
- Are expenses deductible?
- Does my business type qualify?
…and the list goes on.
And we’re not surprised, because the initial PPP launch was a disaster. Anybody remember?
All we saw were headlines like “PPP loan plan a mess so far for small businesses”, or
“The Paycheck Protection Program has been a disaster”.
And if you were actually trying to get a loan, it was even worse.
So today, we’ll be providing the answers to most common questions you may have surrounding the new PPP loans so you can get the support you need.
Note that you will want to speak to your accountant or lawyer for specific advice regarding your specific situation.
Let’s dive in to the most commonly asked questions regarding the Paycheck Protection Program. aka PPP loan 2021.
PPP Loan 2021 Most Commonly Asked Questions (And Our Answers!)
1. If I did not receive the PPP loan initially, am I still able to receive a PPP loan?
Yes, there is hope. If you did not receive round 1 of PPP loans or returned your loan, you are eligible to receive PPP for the first time if you meet the following conditions:
- Your business was in operation on February 15, 2020, and is currently operational
- You had paid salaries and payroll taxes or paid independent contractors
- Your business has fewer than 500 employees whose principal residence was in the United States
- You apply by March 31, 2021, or until funds are exhausted
The following business types are also eligible:
- Sole proprietors
- Independent contractors
- Self-employed individuals
- Certain non-profits (the new bill has expanded eligible businesses to include certain 501(c)(6) non-profit organizations)
- Seasonal employers; the new bill has clarified the definition of these to be businesses that operate no more than seven months within a year or earn no more than a third of gross receipts within a six-month period
- Faith-based organizations that have less than 150 employees
And also a few new additions that were previously not able to apply:
- Local news and media organizations (new addition)
- Housing cooperatives (new additions)
- Certain 501(c)(6) organizations
- Destination marketing organizations.
You are generally not eligible for a PPP loan if you meet any of the following criteria:
- Your business operation is considered illegal under any Federal, state, or local law
- Your business has an owner with 20 percent or more of the equity that is presently subject to criminal charges brought in any jurisdiction or has been convicted of a felony within the last five years
- You, or any business owned or controlled by you or any of your owners, has previously obtained a loan from the SBA or any other Federal agency that is currently delinquent or has defaulted within the last seven years.
- You or your business is bankrupt or is currently in bankruptcy proceedings
- Your business is a hedge fund or private equity firm
2. I received a PPP loan, am I eligible for a second draw?
The requirements for a second draw are a bit different than the requirement for a first draw:
Your business is eligible for a second draw if the following criteria apply:
- You have exhausted your first PPP loan
- Your business was in operation on February 15, 2020, and is currently operational
- You have fewer than 300 employees
- You can demonstrate a minimum 25% or greater reduction in gross revenue
There are two ways to demonstrate a 25% or greater reduction in gross revenue:
- First, you can compare any quarter in 2019 with a comparable quarter in 2020.
- Second, you can use your 2019 and 2020 annual tax returns to confirm the revenue reduction.
3. How big of a PPP loan can I receive?
If this will be your first time receiving a PPP loan, the maximum amount you can receive is the lesser of:
- 2.5 times your average monthly payroll costs and healthcare costs or
- $10 million
Restaurants and other hospitality businesses may have exceptions to these limits.
If this will be your second draw of a PPP loan, the maximum amount you can receive is a bit more stringent and is the lesser of:
- 2.5 times your average monthly payroll costs and healthcare costs from the prior year or within the calendar year; or
- 3.5 times your average monthly payroll costs and healthcare costs from the prior year or within the calendar year for businesses in the hospitality and food services industries. Here is a complete list in this link; or
- $2 million
4. Are PPP loan-related expenses deductible?
Previously, IRS guidance stated that PPP loan-related expenses were not deductible. The new act clarifies that expenses related to the PPP loan are actually deductible if the loan is forgiven. A huge win for businesses that received and will receive PPP funds.
The new bill also allows businesses who take a PPP loan to take the employee retention tax credit, which previously only allowed businesses to opt into either the PPP loan or the credit.
5. How can I get my PPP loan forgiven?
To be eligible for PPP loan forgiveness, borrowers must spend at least 60% of the loan on payroll.
PPP loan borrowers can spend up to 40% of the loan on other qualified expenses during the covered period. Here is the list of qualified non-payroll expenses:
- Rent
- Mortgage interest
- Utilities
- Four Newly Expanded Categories
- Covered operations expenditures: expenses for software, cloud computing, HR, or accounting needs.
- Covered property damage costs: expenses not covered by insurance related to property damage caused by public disturbances in 2020
- Covered supplier costs: expenses to a supplier for goods in effect prior to taking out a PPP loan that was essential to your operations when the expense was made and
- Covered worker protection expenditures: expenses related to personal protective equipment and adaptive investments to help comply with federal, state, and local health and safety guidelines related to COVID-19 from March 1, 2020, until the end of the national emergency declaration.
The new bill states that EIDL advances are no longer deducted from a borrower’s forgiveness amount.
The new bill also offers a streamlined forgiveness process for loans $150,000 or less.
If you borrowed $150,000 or less, you will simply need to submit a one-page certification that includes the number of employees the business retained because of the loan, an estimate of how much of the loan was spent on payroll, and the total loan amount.
To apply for forgiveness, contact your PPP lender for the correct form and submit the form to your PPP lender.
PPP Loan 2021: Quick Recap
Well, there you have it!
As a recap, we answered the following questions about PPP loan 2021:
- If I did not receive the PPP Loan initially, am I still able to receive a PPP loan?
- I received a PPP Loan, am I eligible for a second draw?
- How big of a PPP Loan can I receive?
- Are PPP loan-related expenses deductible?
- How can I get my PPP loan forgiven?
Like we mentioned above, if you need more financial and tax guidance for your specific situation, our tax consultants will be happy to help you. Simply contact us today!