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New Stimulus Package – PPP Focus: PPP 2.0 is coming, with some changes to PPP 1.0

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The new stimulus bill will provide relief to small businesses through a new round of PPP loans (hereafter termed PPP 2.0), and changes to the existing PPP program (PPP 1.0). In the bill, $284 billion of the $900 billion stimulus package has been appropriated for PPP 2.0. Similar to the first round of PPP, businesses may be eligible for full forgiveness of the PPP loans if proceeds are spent properly within a specific time period.

Businesses that are eligible for a new round of loans include:

  • Those with no more than 300 employees (a decrease from 500 employees in PPP 1.0).
  • Must be able to show a reduction of at least 25% in gross receipts in any quarter in 2020 compared to the same quarter in 2019. If you were not in business in 2019, there are other options for calculating the reduction in gross receipts.
  • For borrowers that have a loan from PPP 1.0, the business must have fully exhausted, or have planned to exhaust the proceeds. At present, it does not appear that a borrower needs to have already applied for forgiveness from PPP 1.0 to be eligible for a PPP 2.0 loan.

There are also new features in this round of the Paycheck Protection Program, including:

  • Maximum loan amount of $2,000,000, subject to payroll calculations.
  • Businesses hit the hardest (mainly the hospitality industry) will be able to take loans at 3.5 times average monthly payroll. All other businesses can take 2.5 times the average monthly payroll.
  • The borrower can choose a covered period of anywhere between 8 weeks and 24 weeks.
  • Streamlined forgiveness for loans less than $150,000.
  • Additional non-payroll covered expenses can be included, but the requirement remains that 60% of proceeds be spent on payroll.

Potential borrowers should evaluate their financials to determine if your business has enough of a reduction in revenue to qualify for a loan under PPP 2.0.

Borrowers should also begin to calculate their potential loan amounts, which appear to be based on 2.5x the amount of 2019 payroll costs (similar to PPP 1.0). Those in hospitality-related industries (generally with a NAICS code beginning with 72), may be eligible for a loan of 3.5x payroll costs. Additional computation scenarios are available for seasonal employers and businesses not existing in 2019 are available as well.

At this point, it is unclear as to when the SBA will release a new PPP loan application. The language in the bill states “no later than 10 days” after the signing of the bill for SBA to release guidelines, which may include a new application, as well as guidance on how to calculate the reduction in gross receipts.

Additionally, we advise that a borrower communicate with your bank or lender to see if they anticipate funding PPP loans for the new round. If your bank is unable to help you, your Berntson Porter representative has some additional resources to help.

Changes to PPP1.0:

As mentioned in the blast posted yesterday, the new bill includes some updates for those borrowers who have not yet applied for forgiveness:

  • Additional non-payroll costs are eligible for forgiveness, including such items as worker equipment protection, personal protective equipment, modifications to workspaces, renovations to create or expand outdoor space, and the like, as well as certain costs related to technology, repairs for civil unrest, and other costs as defined in the bill. Note that these non-payroll costs are still limited to 40% of the total costs eligible for forgiveness.
  • Expanded options for covered periods. The original bill allowed for an 8 or 24 week covered period. Now, a borrower can choose any period between 8 and 24 weeks.
  • Streamlined forgiveness for borrowers under $150,000. It appears that borrowers will only need to submit a one-page forgiveness application (likely similar to the 3508S). These borrowers will likely not be subjected to the required reductions in forgiveness amounts generally caused by reducing salaries or headcount. The new one-page form is required to be released within 24 days after the law is enacted.

We will continue to provide updates as additional information is released. At present, we are available to assist with the loan forgiveness application process – for additional information and to have one of our team members contact you, please fill out the intake form linked here.

Berntson Porter is here to help businesses navigate these challenging times. Visit our Resource Center for up-to-date information about COVID-19 legislation that impacts you and your business.

For more information, please contact your Berntson Porter representative at 425-454-7990. We are here to help!

Berntson Porter is here to help businesses navigate these challenging times. Visit our Resource Center for up-to-date information about COVID-19 legislation that impacts you and your business.