Last week, lenders nationwide were permitted to begin accepting applications for second-round Paycheck Protection Program Loans (PPP 2 Loans), as authorized by the Consolidated Appropriations Act (CAA).

There is some $284 billion available in funds for these loans, but remember, the initial $349 billion authorized in 2020 ran out within about two weeks – so don’t hesitate to determine whether you are eligible and, if you are, get your calculations and documentation in order without delay.

PPP Round 2 Loans are capped at $2 million.

Eligibility

Eligibility for a PPP Round 2 Loan requires that:

• You took a PPP Round 1 Loan, the proceeds of which have already been, or soon will be, exhausted,
• You have 300 or fewer employees, and
• You experienced a 25% or greater decline in revenue in 2020 versus 2019, either for any given calendar quarter (you cannot use any three-consecutive-month period you choose) or for the year as a whole.

Note that, if you are simply running a total of your 2020 bank deposits to determine revenue (some cash-basis businesses may be tempted to do this), you must be vigilant in excluding any PPP Round 1 Loan proceeds – it is neither appropriate nor in your interest to include them.

We recommend that you go ahead and run your profit and loss statements, having ensured that PPP Round 1 Loan proceeds are entered into a different account than your ordinary revenue, and use those figures to determine your eligibility for a PPP Round 2 Loan.

Documentation & Calculations

If you are seeking a PPP Round 2 Loan of $150,000 or less, and applying to the same lender you used for your PPP Round 1 Loan, your lender may not require documentation supporting your 2019 or 2020 quarterly revenue figures, but you need to keep them on hand in case they are asked for.

Likewise, for such a loan ($150,000 or less and with the same lender from whom you received the PPP Round 1 Loan), 2019 payroll documentation may not be required to apply for a PPP Round 2 Loan.

But for those seeking larger loans, or applying through a new lender, you may be required to provide:

• Quarterly revenue for 2020 versus 2019 (profit and loss statements) showing a decline of 25% or greater for at least one quarter of 2020 compared with 2019.
• Documentation of payroll expenses. The CAA allows you to use either 2019 or 2020 payroll data to determine the amount of the loan you can apply for, so use the year with the higher payroll costs, which gives you a higher loan figure.

Other Potentially Required Documents

Other documentation you may need to provide:

• Photo ID for owners who own 20% or more of the business.
• Profit and loss statements for 2020 and 2019.
• 2019 business tax returns (2020 if available). For partnerships, this means both IRS Form 1065 and Schedule K-1s, for sole proprietors IRS Form 1040 Schedule C.
• Your Articles of Incorporation.
• Payroll reports listing gross wages, paid time off, and taxes for all employees for all months of 2020.
• Form 941 (Employer’s Quarterly Federal Tax Return).
• Form 944 (Employer’s Annual Federal Tax Return).
• Form 940 (Employer’s Annual Federal Unemployment Return).
• Form W-3 (Transmittal of Wage and Tax Statements).
• Documentation supporting employer-paid benefits such as health insurance and retirement plan contributions.

While we consider it unlikely that the rules governing PPP Round 2 Loans will change as significantly or as frequently as those governing PPP Round 1 Loans did, we feel some changes are more than likely. You never know.

We will monitor the program, and, of course, report back to you.

Stay tuned!

If you have questions on whether a PPP Round 2 Loan is both available to and beneficial for your business, please click here to email me directly.

Until next Wednesday –

Peace,