PPP Loan Updates You Should Know
The US Government has recently enacted Economic Aid Act which re-opens the Payroll Protection Program ‘PPP’, the flagship corporate Covid assistance package.
The Payroll Protection Program is now open for new first-time applications, as well as returning applicants who are able to benefit from a second round of PPP funding. Applications are now open, and must be filed prior to the 31st March, 2021.
Please review the below updates and don’t hesitate to reach out to your KSBarlevi contact with any questions you may have on how this impacts your business.
New First Draw Applications
The Economic Aid Act allows first time applications to apply for a PPP loan, following the previous closure of first round loans in August 2020. For a business to be eligible, it must meet the following criteria:
- Have been an operational business as of 15th February, 2020
- Have fewer than 500 employees across all affiliated business entities
As previously, first draw PPP loans can be a maximum of 2.5x the average monthly payroll, for either 2019 or 2020.
Second Draw PPP loans
Borrowers who have previously received a first draw PPP loan are able to apply for a second PPP loan, subject to the following additional criteria:
- They have received a first round PPP loan & have used the PPP funds received previously
- They have experienced at least a 25% reduction in gross receipts in any one quarter of 2020, when compared with that same quarter in 2019
- Have fewer than 300 employees
Second draw PPP loans are capped again at 2.5x the average monthly payroll for either 2019 or 2020 – with an absolute loan limit of $2million.
As previously, PPP funds must be used on eligible expenses in order to be forgiven:
- At least 60% of the PPP loan received must be spent on payroll
- Other eligible costs include mortgage interest, rent, utilities as well as certain operational costs
The forgiveness criteria remain unchanged. In order to achieve full forgiveness of the first & second draw PPP loans, borrowers must have:
- Maintained staff headcount through the covered period – either 8 or 24 weeks from the date loan proceeds were received.
- Maintained employee compensation of at least 75% of the pre-Covid level