Start planning now for potential second-round PPP funding

As Congress continues to discuss and develop additional COVID-19 relief measures, there is a possibility that such a package could include a second round of Paycheck Protection Program (PPP) loans. Businesses interested in securing PPP funding should start preparing now to apply when the time comes. 

Read on for a summary of the Continuing the Paycheck Protection Program Act proposed by the GOP, which would include Paycheck Protection Program Second Draw Loans, currently proposed with a pool of $257.7 billion. Note that details are subject to change as the measures continue through revision and approvals; we will provide updates as they become available.

ELIGIBILITY

To be eligible for PPP loans in this round, small businesses would need to:

• Meet the applicable SBA revenue size standard
• Have no more than 300 employees (down from 500 in the first round)
• Demonstrate at least a 25 percent reduction in gross revenues between comparison quarters in 2019 and 2020.

See our previous article for more eligibility details and nuances.

The proposal includes set-asides for:

• First-time PPP borrowers with 10 or fewer employees
• Second-time PPP borrowers with 10 or fewer employees
• First-time PPP borrowers who have been made newly eligible
• Second-time returning PPP borrowers
• Loans made by community lenders

MAXIMUM LOAN SIZE

Businesses could apply for the lesser of:

• Maximum loan size of $2 million (down from $10 million in the first round)
• 2.5 times the average total monthly payroll costs, plus up to $50,000 for covered worker protection expenditures incurred or paid by the recipient during the period beginning March 1, 2020, and ending on the date the relief package is enacted
  • $40 billion is included in the proposal to cover those amounts spent on covered worker protection expenditures, a provision intended “to help ‘front-line’ sectors like restaurants and personal services.”

FORGIVENESS

• Businesses would still need to meet the 60/40 cost allocation for payroll and nonpayroll costs to receive full forgiveness.
• Forgivable expenses would be expanded – from payroll costs, mortgage, or qualified interest, rent, and utilities – to also include certain covered supplier costs, worker protection expenditures, and operations expenditures.
• As in the first round, borrowers in this round would be allowed to select a loan forgiveness covered period between eight and 24 weeks during which to spend loan proceeds on forgivable costs.
• SBA issued a simplified forgiveness application in October for borrowers with loans of $50,000 or less. The new proposal simplifies the forgiveness application process for loans up to $150,000. (However, it also strengthens SBA’s ability to audit and review forgiven loans, with $50 million appropriated for that purpose.)
• Borrowers that also received SBA Economic Injury Disaster Loan Advances would no longer need to subtract such advances from their PPP forgiveness.
• See our previous guide to PPP forgiveness for more information.

OTHER UPDATES

According to the proposal, this PPP act would also…

• “[Provide] Farm Credit System Institutions with greater certainty and equity in PPP lending participation.”
• Define “seasonal employer”
• Establish “a procedure in the bankruptcy process if the Administrator determines certain companies in Chapter 11 are eligible for PPP loans.”
• Establish a $15 billion grant program to support “shuttered live venues and theaters that have experienced significant revenue losses.”

_{Any advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues. Nor is it sufficient to avoid tax-related penalties. This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.}