The legislation mandates the Small Business Administration and Treasury to provide guidelines for new forgiveness rules and new loan applications no later than 10 days after the legislation is signed into law.
As of today, here are some key provisions of the legislation to consider:
- Existing PPP borrowers may apply for a second loan provided you have 300 or fewer employees and can demonstrate you experienced a 25% reduction in gross receipts during a quarter in 2020 compared with the same quarter in 2019.
- First-time PPP borrowers will be subject to the program's original eligibility rules.
- The maximum amount available for second-draw loans is $2 million based upon your payroll. You will be eligible to borrow an amount equal to 2.5 times your average monthly payroll costs.
- Loans of less than $150,000 will be able to use a simplified loan application and will get simplified forgiveness of the second-draw loan.
- Borrowers are still required to spend at least 69% of the borrowed funds on payroll to receive full forgiveness. The other 40% may be used on eligible costs as before, including certain mortgage expenses, rent, and utility payments.
- Importantly, the legislation clarifies that businesses that received first-draw loans and that receive second-draw loans may take tax deductions for the expenses covered by forgiven loans.
The PPP loans are again backed by the Small Business Administration but are issued by financial institutions. If you were granted a first-draw loan, it would make sense to contact the institution that issued your loan to apply for the second-draw loan as soon as possible. In that way, you will be in their queue as soon as the guidelines are issued by the SBA and Treasury.
If you need assistance in finding a bank for a second-draw loan, please let us know. We were able to help some of our Affiliates find a bank for their first-draw loans and would be pleased to try to help you should you need assistance.
We know many of you have worked hard to have your voices heard by your elected representatives regarding the measures that need to be taken in order to emerge from the fallout of this health crisis. This economic relief, combined with the rollout of multiple vaccines this month are two welcome steps on our journey on the long road back to prosperity.