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New Guidance on Second Paycheck Protection Program (PPP2) Released by SBA – What Small Businesses Need to Know

New Guidance on Second Paycheck Protection Program (PPP2) Released by SBA – What Small Businesses Need to Know

by The Editor
February 15, 2021
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As of December twenty seventh, 2020 the Paycheck Safety Program is again, and Biz2Credit can get your business started with a simple course of that can assist you get funded shortly.

When the Financial Support to Laborious-Hit Small Companies, Nonprofits and Venues Act, (Financial Support Act or EAA), handed on December twenty seventh, 2020 as a part of the federal government spending bundle, the laws specified that SBA should present steering inside ten days, outlining the brand new program and the $284.5 billion {dollars} it funds. Steerage got here on the eleventh hour of the tenth day. SBA has signaled a second spherical of assist is quick approaching. Now could be the time for small companies to higher know the brand new guidelines of aid.

MORE COVID-19 RESOURCES FROM BIZ2CREDIT
Go to the COVID-19 Resource Hub
Watch Recorded Webcasts on PPP
Go to the Small Business Toolkit

The opening day of a Second Paycheck Safety Program (PPP2) is simply across the nook, because the Small Enterprise Administration (SBA) launched steering late on Wednesday January 6 on the Financial Support Act. Steerage got here within the type of two interim last guidelines (IFRs) that may outline how small companies entry $284.5 billion in PPP2 funds.

What’s within the PPP2 IFRs?
The primary IFR printed this week consolidates the entire first spherical PPP guidelines right into a single doc, whereas the second presents readability for second draw qualification and expanded eligibility.

By consolidating the IFRs carried over from the CARES Act and PPP Flexibility Act laws, SBA presents a much-needed little bit of housekeeping. The only doc is far simpler to navigate than its cumbersome predecessors. On prime of that, language has been up to date to mirror the brand new intentions of Congress in passing the Financial Support Act.

Then there’s the brand new IFR, particular to second draw PPP loans. The brand new IFR lays out guidelines for this extremely anticipated piece of this system. Amongst its issues are laws on how hard-hit companies could get second PPP loans, how eating places could obtain elevated assist, and which entities will likely be newly eligible for PPP aid.

Between the 2 paperwork SBA gives a a lot clearer path to funding than on the outset of PPP spherical one. Right here is every thing small companies must know concerning the new Financial Support Act steering.
EAA Provisions for First and Second Time PPP Mortgage Debtors
The EAA reopens the mortgage program for first-time debtors, those that have by no means taken a PPP mortgage earlier than, generally known as a primary draw, and creates a brand new provision for second-time debtors who’re taking a second draw from PPP funding.

First draw PPP loans could have been taken through the first spherical if the enterprise took a PPP mortgage in 2020. As a result of EAA reopens to first draw debtors, first draw loans might also be taken on this second spherical of PPP.

Funding for second draw loans was put aside particularly for hard-hit companies to take a second mortgage, which Congress felt was obligatory given the persevering with results of the pandemic. These companies might want to meet some new necessities to be eligible for the mortgage. Usually, guidelines from the primary draw will stay in impact for the second draw, though the brand new IFR does replace these guidelines particularly for the second attract a variety of locations.

Learn Extra: Aid Hopefully on the Manner: The New $900 Billion Coronavirus Response Package deal

Each first and second draw PPP mortgage varieties will likely be topic to an utility deadline of March thirty first. They may even each have extra forgiving lined durations. Underneath the EAA, the enterprise could select a lined interval period ranging anyplace from 8 to 24 weeks.

For these instances the place new guidelines supersede the previous ones, the brand new IFR for second draw provides constancy to guidelines that had been unclear earlier than.

How do companies discover out if they’re eligible for a second draw PPP mortgage?
As a result of the brand new Financial Support Act is concentrated on supporting arduous hit companies, many companies should qualify for a second PPP mortgage. Eligibility for a second PPP mortgage relies on proving a lower in enterprise income that’s better than or equal to 25%.

In line with the IFR there at the moment are two methods to point out income discount. Each of those strategies use “gross receipts” as a measure of income. The IFR on second draw loans defines gross receipts to incorporate all income in no matter kind acquired or accrued (in accordance with the entity’s accounting methodology) from no matter supply, together with from the gross sales of services or products, curiosity, dividends, rents, royalties, charges, or commissions, decreased by returns and allowances.

Included:
• All income – gross sales of merchandise/providers
(in accordance with the entity’s accounting methodology – both Money or Accrual, whichever is generally used for that enterprise)
• Curiosity earnings
• Dividends
• Rents, Royalties, charges or commissions (decreased by returns and allowances)
Excluded:
• Taxes collected and remitted
• Proceeds from gross sales inside affiliated firms
• Quantities collected for an additional enterprise (e.g. brokers and brokers holding cash whereas in transit to its last supposed recipient)

The preliminary rule acknowledged that debtors can calculate income discount by evaluating a single quarter in 2020 to a single quarter in 2019. Nevertheless, many companies don’t hold quarterly financials. For companies that want, the SBA has introduced that the rule will likely be simplified to permit for annual comparisons if the enterprise had full 12 months of operations in each 2019 and 2020.

Nevertheless, the federal government is not only freely giving cash to companies that aren’t really in want. The foundations from the SBA now state that companies, along with their associates, will likely be capped at taking not more than $4 million in complete for all second draw loans, and additional can take not more than $20 million throughout all loans acquired from the PPP over each first and second rounds. These new guidelines are designed to forestall a number of the mishaps that noticed deserving small companies standing in line whereas bigger firms grabbed a disproportionate share of the funding within the first few weeks of this system.

How does PPP2 assist eating places and accommodations?
Eating places and hospitality companies have been among the many hardest hit by the COVID-19 pandemic. The EAA gives the primary restaurant-specific assist supplied by the federal authorities.
All companies with a NAICS code beginning with 72 (generally known as the Lodging and Meals Providers trade) qualify for a mortgage quantity as much as 3.5 occasions payroll. First draw companies with NAICS codes starting in 72 will qualify if they’ve not more than a complete of 500 workers. Second draw companies with NAICS codes starting in 72 are eligible in the event that they make use of not more than 300 individuals per location and meet the income discount necessities.
The elevated PPP aid applies to:
• Second draw loans
• Eating places, Motels, and different institutions with NAICS Code 72
• Any enterprise that averages lower than 500 workers per bodily location
• Elevated restrict on tax deductible enterprise lunches meant to carry extra site visitors, or orders, to eating places

Restaurant and resort areas with a shared guardian firm that function as separate authorized enterprise entities can apply for enhanced aid individually without having to use the SBA’s commonplace affiliation guidelines.

What paperwork will likely be required for PPP functions this time?
One of many issues many small enterprise homeowners had been shocked by when making use of for a PPP mortgage within the first spherical was the quantity of documentation that lenders required earlier than they’d course of the mortgage. With these new guidelines from the SBA, a few of these documentation necessities ought to be simplified going ahead with the second spherical of this system.

Paperwork wanted to use for the brand new PPP loans have been carried over from the primary spherical of PPP loans. In actual fact companies that took a primary PPP mortgage in 2020 and want to use a 2019 reference interval for calculating their eligibility could not must resubmit supporting documentation to their lenders.

Listed below are the paperwork that candidates will generally want to use for PPP loans.
Paperwork for first- and second-time debtors:
• Payroll abstract report
• Payroll tax filings – IRS 940 (or 990), IRS 941 for relevant quarters
• Identification paperwork: driver’s license or passport for principals
Paperwork for income discount proof (solely applies to second-time debtors):
• Tax returns
• Quarterly earnings statements
• Financial institution statements
Debtors with over $150,000 in eligibility quantity should present these paperwork to show income discount up entrance after they apply. Debtors below $150,000 should produce these paperwork earlier than making use of for forgiveness.

What Can Small Companies Do Proper Now?
The PPP Administrator has launched a press release affirming the SBA’s dedication to small and underserved companies, and has introduced that the SBA will begin opening the mortgage portal to solely small lenders for not less than the primary two days of program reopening.

As Biz2Credit has labored with and represented small companies since its founding in 2008, we could also be included on this first phase of lenders. Additional steering remains to be pending from the SBA as of this writing.

Pre-Apply for Your New PPP Mortgage
A very powerful factor enterprise homeowners can do proper now’s to be ready for the opening of this second PPP. We encourage all small enterprise homeowners to pre-apply with a provisional utility. Because the new program was introduced, we’ve been accepting these at Biz2Credit.com/PPP. This step will give a head begin to debtors by getting ready their functions and obligatory paperwork, now whereas there’s nonetheless time earlier than this system opens. When this system opens, the funds might be used up in near-record time.

Pre-apply for the Paycheck Safety Program

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