Paycheck Protection Program (P3) Loans- Round 2
Paycheck Protection Program (P3) - Round Two
The Consolidated Appropriations Act of 2021 (“CAA” H.R. 133) passed Congress and was signed into law on December 27th, 2020. The CAA package includes a second round of funding for the Paycheck Protection Program (PPP), provides new and additional economic assistance for American workers, families, and small businesses.
Business Impact NW is dedicated to helping our community’s small businesses get the support and funding they need during this pandemic. Our mission is to assist those businesses that may be underserved or otherwise have difficulty accessing support and funding. Our dedicated team is available to assist you whether you already have received PPP or wish to apply for new or additional funds.
On February 22nd President Biden announced several reforms to the current Paycheck Protection Program, in an effort to support small businesses that haven't been able access much needed financial relief. These changes will primarily benefit business owners with little to no employees, located in low income neighborhoods, and/or sole proprietors, independent contractors and self-employed individuals. Additionally, they will eliminate restrictions regarding business owners who:
- have a felony record
- are delinquent on their student loans, and/or
- are non-citizens who are lawful U.S. residents
Starting on Wednesday, February 24, 2021, there will be a 14-day period during which only businesses with fewer than 20 employees can apply for relief through the PPP. Applicants are welcome to use their Individual Tax Payer Identification Number (ITIN), as opposed to an Employer Identification Number (EIN), or Social Security Number (SSN). Additionally, sole proprietors may now apply using their Gross Receipts / Sales on their 2019 or 2020 Schedule C, as opposed to their Net Earnings on their 2019 or 2020 Schedule C.
Should you decide to apply with Business Impact NW, please register for our waiting list here. We also encourage you to schedule a one-on-one coaching session with your Business Impact NW coach to assist you as needed.
Learn more about President Biden's Paycheck Protection Program Equitable Access reforms here.
What you need to know about PPP-Round 2:
- The deadline for second round PPP applications has been extended until May 31st, 2021.
- Businesses are eligible to receive a second forgivable loan if they:
- employ 300 employees or less;
- have used or will use the full amount of their first PPP;
- and demonstrate at least a 25% reduction in gross receipts in any quarter in 2020 compared to the same quarter in 2019.
- Small business owners can also apply for an initial PPP loan.
- Simplifies the forgiveness application for loans under $150,000.
- Allows borrowers to specify a covered period between 8 and 24 weeks
- Expands eligible expenses
- Businesses in the restaurant and hospitality industries are eligible to receive loans of 3.5 times average monthly payroll, rather than 2.5 times.
The SBA, in consultation with the U.S. Treasury Department, has opened the Paycheck Protection Program loan portal on Monday, Jan. 11, 2021 at 9 am ET. On January 11th First Draw PPP loan applications from participating CFIs, like Business Impact NW will be open. A First Draw PPP loan is for those borrowers who have yet to receive a PPP loan before the program closed in August 2020. If you are interested in applying for a First Draw PPP loan click here to indicate your interest and a member of the Business Impact Lending Department will contact you directly.
For current Business Impact NW PPP borrowers, Second Draw PPP Loans will open up to you on Wednesday, January 13th 2021. The SBA is giving priority to community lenders such as Business Impact NW over other lenders, so you will get priority. A Second Draw PPP loan is for certain eligible borrowers that previously received a PPP loan, generally have 300 employees or less, and has suffered a 25% reduction in gross receipts. See this PPP Second-Draw infographic for more information on eligibility requirements.
Business Impact NW can help small businesses with applications for the P3 program. Our in-house COVID Response Team, business coaches, and loan officers are preparing to support this new wave of federal support.
The SBA offers free counseling and training events to help you with the Paycheck Protection Program, learn more about the free resources to support you PPP application provided by the SBA here.
Curious about the status of your PPP application? For borrowers who have had their PPP application submitted to the SBA by their lender, you can create an account in the SBA Capital Access Financial System (or CAFS) to monitor their loan status. Learn more here.
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What is the Paycheck Protection Program?
The Paycheck Protection Program is part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. This is a program intended to provide American small businesses with eight weeks of cash-flow assistance through 100 percent federally guaranteed loans.
- All small businesses are eligible
- The loan has a maturity rate of 5 years and an interest rate of 1%
- No need to make loan payments for 16 months
- No collateral or personal guarantees required
- No fees
- The loan covers expenses for 24 weeks starting from the loan origination date (if the obligations began before February 15, 2020)
- The loan can be forgiven and essentially turn into a non-taxable grant
Do you qualify for the program?
Likely yes! This program is more extensive than the SBA disaster loan. Small businesses, sole proprietorships, independent contractors, and self-employed individuals can all qualify.
- Sole proprietorships will need to submit schedules from their tax return filed (or to be filed) showing income and expenses from the sole proprietorship.
- Independent contractors will need to submit Schedule C.
- Self-employed individuals will need to submit payroll tax filings reported to the Internal Revenue Service.
What can you use the funds for?
60 percent of the PPP loan is supposed to be used to fund payroll and employee benefits costs.
The remaining 40 percent can be spent on:
- Mortgage interest payments
- Rent and lease payments
If you stick to these guidelines, you’ll be able to have 100% of the loan forgiven (effectively turning it into a tax-free grant).
Tip: Create a new, separate bank account to hold the funding so it’s easier to keep track of these expenses when you’re preparing to apply for loan forgiveness.
What counts as “payroll costs”?
Payroll costs under the PPP program include:
- Salary, wages, commissions, or tips (capped at $100,000 on an annualized basis for each employee)
- Employee benefits including costs for vacation, parental, family, medical, or sick leave allowance for separation or dismissal; payments required for the provisions of group health care benefits including insurance premiums; and payment of any retirement benefit
- State and local taxes assessed on compensation
- For a sole proprietor or independent contractor: wages, commissions, income, or net earnings from self-employment, capped at $100,000 on an annualized basis for each employee.
In other words, most payroll costs are covered. However, the following scenarios are not covered:
- Payments made to independent contractors
- S corps and C corps owners who aren’t on payroll (shareholders distributions don’t count as payroll under this program)
How much funding can I receive?
The maximum amount you can receive from Business Impact NW is your monthly average payroll cost in 2019, multiplied by 2.5, up to a maximum of $10 million.
If you are a seasonal employer, the monthly average cost will be calculated differently. We will use a 12-week period beginning either February 15, 2019 or March 1, 2019, and ending June 30, 2019.
If your business did not exist before June 30, 2019, we will look at your costs in January and February 2020.
How do you apply?
The SBA itself doesn’t lend you the money, they just “back” the loan that the lender provides. You will get the loan directly from Business Impact NW or other SBA-approved lenders offering the loan.
You are encouraged to apply early as there is a funding cap for this program. Deadline to apply is August 5th with all documents submitted.
As part of your application, you’ll be asked to verify:
- Current economic uncertainty makes the loan necessary to support your ongoing operations.
- The funds will be used to retain workers and maintain payroll or to make mortgage, lease, and utility payments.
- You have not and will not receive another loan under this program.
- You will provide Business Impact NW with documentation that verifies the number of full-time equivalent employees on payroll and the dollar amounts of payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities for the eight weeks after getting this loan.
- You acknowledge that Business Impact NW will calculate the eligible loan amount using the tax documents you submitted. You affirm that the tax documents are identical to those you submitted to the IRS.
Financial documentation you’ll need
You’ll need to provide payroll/bookkeeping records to prove your payroll expenses.
That could include:
- 3rd party payroll processor
- Payroll tax filings
- Payroll tax forms from 2019 (Forms 941, 940 and W-3)
- Schedule C
- Income and expenses from a sole proprietorship
If you don’t have access to those kinds of documents, you can also provide bank records.
How can I get my loan forgiven?
In the 24 Weeks following your loan signing date, all expenses related to the following can be forgiven:
- Payroll—salary, wage, vacation, parental, family, medical, or sick leave, health benefits
- Mortgage interest—as long as the mortgage was signed before February 15, 2020
- Rent—as long as the lease agreement was in effect before February 15, 2020
- Utilities—as long as service began before February 15, 2020
You’ll need to keep your records and have accurate bookkeeping to prove your expenses during the loan period. You will also need to have spent 60% of loan on payroll in order to qualify for loan forgiveness. There will be a loan forgiveness application available for your use.
Business Impact NW must make a decision within 60 days of your forgiveness application submission.