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Need to Know: PPP Loans

Updated: Jan 13, 2021

Right before the end of 2020, Congress passed a $900 billion stimulus package that included $284 billion in Paycheck Protection Program (PPP) loans for small businesses.

Although the fundamental goals and structure of the program remain the same, there are new provisions that try to address some of the flaws from round one of the PPP, as well as information that clears up the program's tax implications.

On January 7, the Small Business Association shared their final rules and applications opened January 11. Here's what you need to know:

  • Applications for all business owners close on March 31.

  • For the first two days after the program reopens, only applications from community financial institutions will be accepted. These organizations typically serve women, minority and underserved entrepreneurs.

  • Businesses will calculate their maximum loan amount using payroll costs for a one-year period, using a date of their choosing that can be in either 2019 or 2020.

  • The maximum loan amount has been substantially reduced from $10 million to $2 million.

  • You can receive a second PPP loan if you have fewer than 300 employees and lost 25% of your gross receipts over one quarter in 2020 compared to the same quarter in the 2019. If you are taking out a loan under $150,000, you do not to provide documentation of this loss until you apply for forgiveness.

  • You cannot apply for a second PPP loan if your application for the first round of loans is still unresolved.

  • If this is your first time receiving a PPP loan, the initial requirements of having up to 500 employees and not demonstrating a loss in revenue apply, according to the Washington Post.

  • In order to have the loan forgiven, businesses must spend 60% of the loan amount on payroll. The remaining 40% can still be spent on rent, mortgage payments, utility costs and other expenditures like purchasing personal protection equipment.

  • Expenses paid for with the PPP loan are tax deductible. We're still waiting for additional details on the tax implications, so it’s unclear if there are exceptions or any limitations on the deductions.

  • Just as before, business owners will apply for the loans through their bank or community financial institution. Applications are not yet open.

The latest stimulus package also included $15 billion set aside for grants for live-music venues and $20 billion to go toward the Emergency Injury Disaster Loan advance grants. Small business owners can once again apply for a grant of up to $10,000 and the deadline to apply for the program’s loans has been extended to Dec. 31, 2021. Applications have not opened for the grant but are expected to in the coming days.

Questions about your application? Contact the Robin S. Weingast & Associates Team.

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