PPP Round 2 Preview: What’s on Deck for Small Businesses

The following is an article by LJ Suzuki published in CFOshare on December 10, 2020.

Do you qualify for a second round of PPP, and are you ready to apply?

Read the article here.

Wondering what small business stimulus will pass in the next round of congressional action? After 2 months of ongoing debate and negotiations, congress is actively converging on a final stimulus bill. We at CFOshare took a sneak peak of the Bipartisan Emergency COVID Relief Act of 2020 December 9th framework and here’s what’s in store for the PPP round 2:

PPP Round 2: What is the Same

The second round of the paycheck protection program will have many similarities as the first. For example:

  • Loans will be forgivable if spent on approved expenses, such as payroll.
  • Loan sizes will be based on historic payroll, although it is not clear what historic reference period will be used.
  • SBA 7(a), 504, and micro loan payments will be further deferred, helping cash flows for businesses with these debts.

New Items in PPP Round 2

Fewer businesses will qualify for the second round of PPP funding. Eligible businesses will be limited to:

  • For profit Businesses with fewer than 300 employees and a 30% revenue loss in any quarter of 2020
  • 501(c)(6) with fewer than 150 employees and are not actively lobbying

There’s some new upside to round 2:

  • Supplier costs, facility modifications, and PPE are now forgivable expenses.
  • Smaller borrowers (fewer than 10 employees) and underserved communities will receive a special allocation to ensure extra funding.
  • Independent live venue operators will receive special funding.

Wins for PPP round 1

Even if you don’t get round 2 funding, there’s some big bonuses for those who got a PPP loan in the first round:

  • Business expenses paid with forgiven PPP loans will be tax deductible (solving the problem we highlighted in previous articles.)
  • Loans under $150k will have significantly simpler forgiveness process.

How does the new PPP round affect my business?

Based on the draft of this bill being negotiated in congress, here’s what CFOshare is recommending to our clients:

  • Don’t file your 2020 income taxes until this bill is either passed or dead. There’s a good chance your tax returns will change based on this bill.
  • If your loan was under $150k, wait to apply for forgiveness. More than likely the process will become much easier, saving you time.
  • If you had significant revenue reductions in 2020, get ready to apply for round 2
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