Paycheck Protection Program (PPP)

The Paycheck Protection Program (PPP) through the U.S. Small Business Administration (SBA) is a lending program designed to provide a direct incentive for small businesses that have been affected by the COVID-19 pandemic to keep their workers on the payroll. The program is available to U.S. businesses, including sole proprietors, self-employed individuals, independent contractors and nonprofits, who meet the SBA loan criteria. The PPP launched in April 2020 and following the success, resulted in a second round of funding and an expansion Flexibility Act to better meet the needs of American small businesses and small business owners.

Once again, the SBA, in consultation with the U.S. Treasury Department, has reopened the PPP for First Draw and Second Draw Loans, which began the week of January 11, 2021, with an application deadline of March 31, 2021.

CALCULATING LOAN AMOUNTS

First Draw PPP Loans

First Draw PPP Loans are available for businesses that have not received a PPP loan before. First Draw Loans can be used to help fund payroll costs, including benefits, and may also be used to pay for mortgage interest, rent, utilities, worker protection costs related to COVID-19, uninsured property damage costs caused by looting or vandalism during 2020, and certain supplier costs and expenses for operations.

Who May Qualify

The following entities affected by Coronavirus (COVID-19) may be eligible:

  • Sole proprietors, independent contractors, and self-employed persons
  • Any small business concern that meets SBA’s size standards (either the industry size standard or the alternative size standard)
  • Any business, 501(c)(3) non-profit organization, 501(c)(19) veterans organization, or tribal business concern (sec. 31(b)(2)(C) of the Small Business Act) with the greater of:
    • 500 employees, or
    • That meets the SBA industry size standard if more than 500
  • Any business with a NAICS code that begins with 72 (Accommodations and Food Services) that has more than one physical location and employs less than 500 per location

First Draw Loan Application

Second Draw PPP Loans

The Paycheck Protection Program (PPP) now allows certain eligible borrowers that previously received a PPP loan to apply for a Second Draw PPP Loan with the same general loan terms as their First Draw PPP Loan.

Second Draw PPP Loans can be used to help fund payroll costs, including benefits. Funds can also be used to pay for mortgage interest, rent, utilities, worker protection costs related to COVID-19, uninsured property damage costs caused by looting or vandalism during 2020, and certain supplier costs and expenses for operations.

Who May Qualify

A borrower is generally eligible for a Second Draw PPP Loan if the borrower:

  • Previously received a First Draw PPP Loan and will or has used the full amount only for authorized uses;
  • Has no more than 300 employees; and
  • Can demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020.

Second Draw Loan Application

 

PPP Loan Forgiveness

One aspect of the loan that is especially appealing for businesses is the loan forgiveness. Businesses can qualify for loan forgiveness for amounts used for payroll costs, mortgage interest, and rent and utility payments during the covered period, if the following criteria are satisfied.

First Draw PPP Loans made to eligible borrowers qualify for full loan forgiveness if during the 8-to 24-week covered period following loan disbursement:

  • Employee and compensation levels are maintained;
  • The loan proceeds are spent on payroll costs and other eligible expenses; and
  • At least 60 percent of the proceeds are spent on payroll costs.

Second Draw PPP Loans made to eligible borrowers qualify for full loan forgiveness if during the 8-to 24-week covered period following loan disbursement:

  • Employee and compensation levels are maintained in the same manner as required for the First Draw PPP loan
  • The loan proceeds are spent on payroll costs and other eligible expenses; and
  • At least 60 percent of the proceeds are spent on payroll costs

 

Maximizing PPP Loan Forgiveness

After receiving a PPP loan, it’s time to start thinking about how to use the loan to receive full PPP loan forgiveness.  Meeting the requirements for forgiveness is key, and it is imperative to have meticulous accounting and documentation of the spending of PPP funds to help make certain you receive the greatest loan forgiveness potential.  Our PPP loan experts can help to ensure you receive the maximum forgiveness.  Contact us today.

Applying for Loan Forgiveness

A borrower can apply for forgiveness once all loan proceeds for which the borrower is requesting forgiveness have been used. Borrowers can apply for forgiveness any time up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 months after the last day of the covered period, then PPP loan payments are no longer deferred and borrowers will begin making loan payments to their PPP lender.

To apply for loan forgiveness, use either SBA Form 3508, SBA Form 3508EZ, SBA Form 3508S or a Lender equivalent. The 3508EZ and the 3508S are shortened versions of the application for borrowers who meet specific requirements.

Paycheck Protection Program Loan Forgiveness Application and Instructions    
  • Form 3508: All borrowers; borrowers who do not qualify to use Form 3508EZ or 3508S
  • Form 3508EZ: Borrowers who did not reduce employee levels, wages or hours
  • Form 3508S: Borrowers who took out loans of $150,000 or less

We Can Help

We recognize that navigating through all the information and understanding the process of tracking the spending of your PPP funds can be complicated and overwhelming. Our experts have remained up to date on the provisions of the CARES Act and the Paycheck Protection Program, and now the Paycheck Protection Program Flexibility Act, and have developed key strategies around the provisions.  We can assist you by providing clarity and direction so that you maximize your loan forgiveness.  Contact your Dannible & McKee professional today.

Additional Insights

For additional information on the Paycheck Protection Program and other COVID-19 related topics, visit our Coronavirus Resource Center.

Coronavirus Resource Center

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