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PPP Round 2 Frequently Asked Questions

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Hey everyone.  Okay, here is some Round 2 information for PPP.  I want to give credit to Funding Forward for providing us with these great FAQ’s.  Funding Forward is also our recommended partner for submitting and managing your Round 2 applications.  Feel free to reach out to them at www.fundingforward.com/contact.

Who is eligible for the Second Draw of the PPP Loans?

Second Draw PPP loans are limited to businesses that:

(i) employ no more than 300 employees (down from 500) or meet an alternative size standard; (ii) have used the entire amount of their first PPP loan or will use such amounts, and 

(iii) had gross receipts during Q1, Q2, Q3, or Q4 2020 that were at least 25 percent less than the gross receipts from the same quarter in 2019. If the business was not in operation for a portion of 2019, then the comparable quarters may be different. 

Which documents are needed to apply?

For a company that has payroll:

  1. 941’s for 2019 or 2020 (you can elect either as the reference year to maximize loan amount) or Payroll company PPP report.
  2. Documents showing a 25% reduction in gross receipts in any calendar quarter of 2020, compared to the same quarter of 2019 (Pending SBA guidelines on which documents required)
  3. February and December bank statements
  4. Owner’s ID front and back; needs to be a clear copy to avoid rejection
  5. Void check for the account where you want the PPP funds to be deposited.

For Self-Employed or Independent Contractors:

  1. Schedule C from your 2019 tax return.
  2. Documents showing a 25% reduction in gross receipts in any calendar quarter of 2020, compared to the same quarter of 2019 (Pending SBA guidelines on which documents required)
  3. February and December bank statements
  4. Owner’s ID front and back needs to be a clear copy to avoid rejection
  5. Void check for the account where you want the PPP funds to be deposited.

Can a new business apply for a PPP round 2 loan?

In order to be eligible for a loan, your business must have been in operation on February 15, 2020.

At what point during the application process do you have to prove 25% gross receipts loss?

Loans over $150k need to show a loss of 25% at the time of the PPP 2 application. Loans under $150k will need to demonstrate the loss at the time of the PPP forgiveness application.

How is the 25% reduction in revenues calculated?

Business owners will compare gross receipts of the business before expenses are subtracted. They will compare those for any quarter in 2020 to the same quarter in 2019 to determine if revenues decreased by at least 25%. 

Also note that for nonprofits and veteran’s organizations, the term gross receipts has the same definition as gross receipts under section 6033 of the Internal Revenue Code of 1986

What Small businesses qualify for PPP 2?

  1. Small businesses, nonprofit organizations, veterans organizations, tribal business concerns, and small agricultural cooperatives that meet the SBA size standards
  2. Sole proprietors, self-employed individuals, or independent contractors.
  3. Certain small news organizations, destination marketing organizations, housing cooperatives, and 501(c)(6) nonprofits may now also be eligible.

What businesses are now eligible for PPP that did not qualify before?

Certain small news organizations, destination marketing organizations, housing cooperatives, and 501(c)(6) nonprofits may now also be eligible.

Is one eligible to receive PPP 2 and Unemployment Benefits at the same time?

No.

What is the Maximum Loan Amount?

Currently, the maximum loan amount is $2 million. 

How do I calculate my PPP loan amount?

Borrowers of a Second Draw PPP loan have an option to calculate the maximum loan amount by multiplying the borrower’s average total monthly payroll in (a) the one-year period prior to the date on which the loan is made, or (b) calendar year 2019, by 2.5x. Hospitality companies should multiply by 3.5x

What is the maximum loan amount for the hospitality industry?

Borrowers that have a NAICS Code 72 (typically restaurants and hotels) are permitted to use a 3.5x multiplier of their average monthly payroll costs to calculate their maximum loan amount, subject to the $2 million cap.

Are these loans forgivable?

Yes! As with the first round of PPP, these loans may be entirely forgiven if spent for the proper purposes (primarily payroll) within a period of 8 to 24 weeks from receiving the PPP funds. However, for the new PPP loans, we expect the Treasury and the SBA to release new loan forgiveness applications. In addition, there will now be a simplified (but not automatic) forgiveness for loans of $150,000 or less.  

If my PPP 1 Loan was not yet forgiven, can I apply for PPP 2?

The borrower does not have to have to apply for forgiveness prior to applying for PPP 2. However, the borrower needs to confirm that they followed the guidelines of the first loan and that the loan would be eligible to be forgiven. The borrower can claim they chose not to apply for forgiveness yet for whatever reason. However, if he did not follow the guidelines, he should speak to his accounting professional to see if he qualifies.

How much of the PPP Funds have to be used on payroll costs?

The minimum is 60% of the loan proceeds.

What is the time period in which a borrower must use the funds in order to qualify for forgiveness?

Borrowers are now able to choose the length of their covered period so long as it is at least eight weeks and is not longer than 24 weeks. 

How is the loan viewed for tax purposes?

PPP loans will not be included as taxable income. Expenses paid with the proceeds of a PPP loan that is forgiven are now tax-deductible. This covers not only new loans but also existing and prior PPP loans, reversing previous guidance from the Treasury and IRS, which did not allow deductions on expenses paid for with PPP proceeds. In addition, any income tax basis increase that results from the borrower’s PPP loan will remain even if the PPP loan is forgiven.

What businesses are NOT eligible to participate in PPP 2?

  1. Entities listed in 13 C.F.R. 120.110 and subsequent regulations except for entities from that regulation which have otherwise been made eligible by statute or guidance, and except for nonprofits and religious organizations. 
  2. Entities involved in political and lobbying activities including engaging in advocacy in areas such as public policy or political strategy or otherwise describe themselves as a think tank in any public document. 
  3. Entities affiliated with entities in the People’s Republic of China. 
  4. Registrants under the Foreign Agents Registration Act  
  5. Entities that receive a grant under the Shuttered Venue Operator Grant program

Is a Sole Proprietor or LLC eligible for PPP?

Yes.

How is a Sole Proprietor and LLC loan amount calculated?

They would use their 2019 Sch C. If the 2019 Tax Return was not yet filed, then the borrower will use their Draft 2020 Schedule C.

See below formula:

Take the amount of line 31 (total net profit)/12 x 2.5 = PPP loan amount.

How does a Sole Proprietor or LLC with no payroll have to use the funds?

He needs to use 60% of the funds for himself.

If someone got a PPP 1 Loan and would like to amend it to receive more funds, would we be able to help provide more funds in PPP 2 to amend for that difference or would he have to go back to his original bank which he received PPP 1 funding?

The borrower would have to return to the same bank from which he received his PPP 1 loan.

How will staffing agency employees be counted?

They are counted as employees for the company they are working for.

Are employee healthcare benefits counted like payroll costs (for PPP terms)?

Yes. Group life, disability, vision, and dental insurance could be included as ‘payroll costs’. 

Does PPP 2 have a $100K payroll limit per employee?

Yes.

I am applying for a  PPP loan for the first time, what rules apply to me?

if you did not apply for PPP round 1 and you are applying now for the first time, all the rules from PPP round 1 apply to you with the exception that the maximum loan funded by the SBA will not exceed $2m. You can also qualify to apply for round 2 PPP once you have exhausted the funds from round 1 in a minimum of 8 weeks. 

*Note the program will only be open for 12 weeks so we recommend you apply as soon as the program opens.* 

If I was rejected for a PPP loan the first time, can I apply again?

Yes! In order to qualify for Round 2, you first need to reapply for round 1 now. Once you are approved and receive your funds, you can also qualify to apply for round 2 PPP once you have exhausted the funds from round 1, after a minimum of 8 weeks.

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