The Paycheck Protection Program has reopened, effective the week of January 11 2021 for new borrowers and certain existing PPP borrowers. This round of the PPP prioritizes millions of Americans employed by small businesses by authorizing up to $284 billion toward job retention and certain other expenses through March 31, 2021, and by allowing certain existing PPP borrowers to apply for a Second Draw PPP Loan.
These loans are fully forgivable and use of funds include but are not limited to payroll and utilities. A forgivable loan used within the guidelines in essence convert to a business grant from the federal government.
You can apply for a PPP loan via Fundera here.
Key PPP updates include:
- PPP borrowers can set their PPP loan’s covered period to be any length between 8 and 24 weeks to best meet their business needs;
- PPP loans will cover additional expenses, including operations expenditures, property damage costs, supplier costs, and worker protection expenditures;
- The Program’s eligibility is expanded to include 501(c)(6)s, housing cooperatives, direct marketing organizations, among other types of organizations;
- The PPP provides greater flexibility for seasonal employees;
- Certain existing PPP borrowers can request to modify their First Draw PPP Loan amount; and
- Certain existing PPP borrowers are now eligible to apply for a Second Draw PPP Loan.
If you received a PPP loan in 2020, you have a second chance. 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.
If you don’t qualify for PPP funding, there are other ways to obtain loans for your startup or small business.
Bench, which provides bookkeeping help to small businesses, published additional guidance on PPP funding. From Bench:
PPP forgiveness requirements
The purpose of the Paycheck Protection Program is to, well, protect paychecks. You must commit to maintaining an average monthly number of full-time equivalent employees equal or above the average monthly number of full-time equivalent employees during the previous 1-year period. And you must spend 60% of the loan funds on payroll.
The amount that can be forgiven will be reduced…
- In proportion to any reduction in the number of employees retained.
- If any wages were reduced by more than 25%.
If you rehire employees that were previously laid off at the beginning of the period, or restore any decreases in wage or salary that were made at the beginning of the period, you will not be penalized for having a reduction in employees or wages. For loans received in 2020, the deadline to do so was December 31, 2020. For loans received in 2021, we are still waiting on more information to be released.
A new exemption on re-hiring employees
Employees who were laid off or put on furlough may not wish to be rehired onto payroll. If the employee rejects your re-employment offer, you may be allowed to exclude this employee when calculating forgiveness. To qualify for this exemption:
- You must have made an written offer to rehire in good faith
- You must have offered to rehire for the same salary/wage and number of hours as before they were laid off
- You must have documentation of the employee’s rejection of the offer
Note that employees who reject offers for re-employment may no longer be eligible for continued unemployment benefits.
“We’re an online bookkeeping service powered by real humans. With Bench, you get a dedicated bookkeeper and powerful reporting software for a crystal clear view of your financial health. All of our services are eligible expenses for PPP forgiveness, and we’ll even provide support in applying for the PPP (or getting that loan forgiven). Whatever happens next, we’re right there with you. Get started on a free trial today.”
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