PPP2 Application & Additional Guidance

While we all were looking forward to putting 2020 behind us, 2021 is starting off with a similar flurry of activity.

Late on January 6th, the SBA issued 120 pages of guidance in the form of Interim Final Rules. The revised application for Paycheck Protection Program Part 2 was released on January 8th.

The SBA will begin taking applications on January 11th although only new borrowers in underserved communities will have access today and tomorrow. On Wednesday, January 13th, all eligible entities nationwide will be able to apply.

Who Qualifies for Round 2?

The maximum loan amount is $2M and the business must have been in existence on February 15, 2020 – same as for initial loan draws. Other requirements:

  • Have fewer than 300 employees. Special rules for NAICS code 72 (restaurants & others).
  • Have used or will use all of the first PPP loan
  • Must have drop in gross receipts in excess of 25%

The Interim final rules provide additional guidance on the gross receipts test. There are two alternatives:

  • A 25% decline in the 2020 calendar year gross receipts compared to the 2019 calendar year gross receipts.
  • A 25% decline in any calendar quarter of 2020 compared to the same calendar quarter of 2019.

Gross receipts are defined by the SBA as all revenue in whatever form received or accrued (based on accounting method) from whatever source. This includes sales of products and services, interest, dividends, rents, royalties, fees, commissions, reduced by returns and allowances but not by the cost of goods sold or other expenses. In other words, pretty much any source of revenue.

However, net capital gains or losses are excluded as well as taxes collected for and remitted to a taxing authority – such as sales and excise taxes. Amounts collected as an agent (such as advertising agents, travel agents, or real estate agents) are not included in gross receipts. The fee or commission on such agency amounts is included in gross receipts.

In addition, the gross receipts and employee requirements of affiliated groups are determined for the affiliated group as a whole, rather than each business separately. However, exceptions may apply.

There are special rules for borrowers not in business during 2019 but in business on February 15, 2020.

How Much is Second PPP Loan Draw?

The second draw is limited to 2.5 times average monthly payroll costs based on one year prior to the loan date (trailing 12 months) or calendar year 2019 or 2020, at the election of the borrower. Those under NAICS code 72 – food service providers, hotels, restaurants, RV parks, and bars use a 3.5 multiplier. Payroll costs include group health insurance, dental and vision plans, disability benefits, life insurance, and owner compensation costs.

As a reminder, applicants are asked to certify “Current economic uncertainty makes this loan necessary to support the ongoing operations of the business”. Borrowers also need to be aware that the loan’s details will not be confidential.

Please contact us if you have questions or need assistance.

Download PPP2 Borrower Application Form