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PPP Updates – PPP 2.0, New Loan Forgiveness Applications and More

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The Paycheck Protection Program (PPP) continues to evolve and provide funding to businesses to keep people employed. The CARES Act passed in March 2020 established the PPP Program, and many subsequent Interim Final Rules (IFR’s) and FAQs have been issued. The Consolidated Appropriations Act, 2021 (CAA) signed in December 2020 further expanded the PPP Program allowing for second draw loans. From the start of this program, the amount of rule changes, updates and new guidance released has been absolutely staggering, which has led to confusion and frustration for borrowers, practitioners and lenders. The approaches to PPP loan applications for funding and loan forgiveness applications continues to evolve. As communicated in our last Blast on the PPP and the Employee Retention Credit (ERC), for most businesses, there is currently no need to rush the loan forgiveness application process.

 

PPP 1.0 – Updates

After business hours on January 19th, the Treasury released three new PPP Loan Forgiveness Applications, and removed all previous versions of the Loan Forgiveness Applications from their site.

  • New 3508S – For loans less than $150k. This form was previously only available to borrowers with loans less than $50,000. Additionally, the amount of supporting documentation required to be provided to the lender and SBA is streamlined from the previous version. However, a borrower still must maintain all documentation internally for three years after forgiveness is granted in case of future SBA examination.
  • New 3508EZ – For borrowers who can certify that they did not reduce their headcount and average paid hours between January 1, 2020 and the end of the covered period, or were unable to operate because of compliance with government requirements established because of COVID-19.
  • New 3508 – For all others, and generally the form we have been advising borrowers to utilize  to “prove their work” on FTE headcount rather than relying on an EZ certification.

The new 3508 and 3508EZ applications incorporate provisions from the CAA, with the addition of certain new categories of non-payroll costs, including Covered Operations Expenditures, Covered Property Damage Costs, Covered Supplier Costs and Covered Worker Protection Expenditures.

At this point, there are more questions than answers on the new forms, but lenders will likely have to update their portals and processes for accepting the new loan forgiveness applications. Further details should be available in the coming weeks. Additionally, we will continue to monitor IRS guidance for those PPP 1.0 borrowers who may retroactively qualify for the 2020 Employee Retention Credit (ERC). Stay tuned to BP’s website for updates, or contact your BP representative to discuss the best current approach to PPP 1.0 forgiveness and ERC related items.

 

PPP 2.0 – Updates

For companies who did not take a PPP loan in the 1.0 CARES Act version, they can now apply for a first draw loan under similar provisions to the 1.0 version. A first draw borrower does not have to show a revenue reduction, and employee levels should be 500 or less. The first draw borrower application form is here.

For organizations who borrowed under PPP 1.0 they can also borrow under PPP 2.0 if they can prove a 25% gross receipts reduction in a calendar quarter in 2020 versus the same quarter in 2019, and have less than 300 employees.  Generally, except for certain industries (primarily restaurants) the loan amount is based on 2.5x the borrower’s average monthly payroll for either 2019 or 2020 (a borrower seemingly can choose which one to utilize, although a lender may place different guidance on which year to utilize) Additionally, the PPP 2.0 loans are limited to 2 million dollars except for special situations. The Second Draw Borrower Application form is here.

A potential borrower should contact their lender to begin the application process. If a PPP 2.0 borrower qualifies for the 2021 ERC, you may want to consider the timing of the 2.0 application. Although a borrower can now choose a covered period between 8 and 24 weeks, the covered period still appears to start on the day the loan has been disbursed.

 

In Closing

The changes in PPP 1.0 loan forgiveness, the availability of PPP 2.0 to eligible borrowers, and expansion of the 2020 ERC to PPP borrowers, as well as the new 2021 ERC are all filled with complexities and new questions. Guidance from Treasury and the IRS is forthcoming in the near future, and BP is continuing to stay abreast of developments and how to best implement.

We will continue to provide updates as additional information is released. At present, we are available to assist with the PPP 1.0 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. With all of the recent changes and updates, we are currently encouraging businesses to exercise caution and not rush either the PPP 1.0 forgiveness application process, and in some cases the PPP 2.0 loan application process in light of other available payroll credits. However, the intake form will let us know you are looking for help in the forgiveness application process, and help provide our team with an preliminary indication of ERC for 2020 or 2021 could be available to your business.

For more information or assistance, 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.