I am sure you have all heard the good news that another Stimulus bill was approved by the House and Senate. The bill still needs to be signed by President Trump but all expectations are that will happen today or tomorrow at the latest. As a result, we wanted to give you the latest information we have based upon the final text of the bill (over 6,000 pages) becoming public. Please note that I am only focusing today on the PPP aspect of the new stimulus bill
Existing PPP1 Loans
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Expenses paid for with the PPP1 loans WILL BE DEDUCTIBLE for tax purposes even if the loan is forgiven.
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A simplified forgiveness process will be launched for all loans under $150,000. This will be a one page form and will have less supporting documentation required for submittal to the bank/SBA. However, the stimulus bill includes funding for the SBA to do reviews of a sample of loans under $150k so proper documentation needs to be kept just in case.
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If you got an EIDL grant, the prior reduction in PPP forgiveness for the grant amount has been eliminated. As a result, you can get full PPP loan forgiveness (assuming you spent all proceeds on eligible expenses) even if you got an EIDL grant.
New PPP2 Loans
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PPP2 loans will be made available to businesses that did not get a PPP1 loan as well as a possible 2nd draws for those business that qualify.
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PPP2 2nd draw eligibility is available to businesses that a) have less than 300 employees AND b) had at least 25% drop in gross revenue in 2020. The 25% is based upon ANY quarter in 2020 being 25% less than the same quarter in 2019 (i.e., you could be down only 10% YTD but if Q2 2020 was down at least 25% compared to Q2 2019, you can qualify for a 2nd draw PPP2 loan).
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PPP1 loans DO NOT have to be forgiven or paid back before an eligible business can take advantage of PPP2 2nd draw.
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Similar to PPP1 loans, the maximum amount for a PPP2 loans will be 2.5 times the average 2019 monthly payroll. However, restaurants and hotels can qualify for 3.5 times the average 2019 monthly payroll.
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PPP2 loans will be eligible for forgiveness if spent on eligible expenses within the covered period (up to 24 weeks after the loan is received).
- Eligible expenses are the same as PPP1 (payroll, utilities, and rent/mortgage interest) but have been expanded to cover business expenses spent to comply with COVID related requirements (PPE for example).
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Similar to PPP1, at least 60% of eligible expenses must be spent on payroll (vs non-payroll).
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Expenses paid for with the PPP2 loan WILL BE DEDUCTIBLE for tax purposes even if the loan is forgiven.
As with PPP1, there are expected to be some additional guidelines issued by the SBA to support the final legislation. Given this (and the holiday), we are hearing that the application process for PPP2 loans will likely be open for business the first or second week of January. If you are interested in a 2nd draw PPP2 loan, we suggest you reach out to the same bank you used on PPP1 to see if they are planning to participate in the PPP2 loan process. In theory, the same documentation you provided for your PPP1 loan should be sufficient for PPP2 although there are likely to be new forms and certifications that will be required. This is simply our suggestion and you are certainly able to work with other banks on a 2nd draw if you like.
We hope this update helps and, as always, do not hesitate to reach out to us if we can be of assistance in any way.
