On Jan. 8, 2021 the Small Business Administration (SBA) announced the small business Paycheck Protection Program (PPP) was re-opening for new borrowers and certain existing borrowers. If you have already taken – or plan to take advantage – of this program, here are a few details. (Note this blog post in no way constitutes legal guidance; for the full program details, please visit the SBA website.)
Differences Between the April 2020 and January 2021 Program
- Certain existing PPP borrowers can request to modify their first-draw PPP loan amount.
- The first loan is open to businesses with fewer than 500 employees in operation as of February 15, 2020, and can be up to $10 million.
- If you’re borrowing for a second time with this round, the maximum loan amount is $2 million.
- Funding is open until March 31, 2021.
- As a PPP borrower, you can set your loan’s covered period to any length between 8 and 24 weeks.
- The PPP now provides greater flexibility for seasonal employees.
- PPP loans can now cover additional expenses, including costs associated with operations, property damage, suppliers and worker protection.
- Note that operations expenditures include payments for any business software or cloud computing service that facilitates business operations, product or service delivery, the processing, payment or tracking of payroll expenses, human resources, sales and billing functions, or accounting or tracking of supplies, inventory, records and expenses.
- Worker protection expenditures can include those to comply with guidance for customer and worker safety including creating or expanding drive-through windows, ventilation and air purification systems, physical barriers like sneeze guards, expansion of indoor and outdoor space, health screening capabilities (on or off site), and purchase of certain types of personal protective equipment (PPE).
Who is Eligible?
Certain existing PPP borrowers are now eligible to apply for a second draw, which rolled out Jan. 13, 2021.
Whether you’re a first-time or second-time borrower, your loan can be up to 2.5 times your business’ average monthly payroll costs. You must certify that you have not received or applied for another SBA loan for similar reasons during the covered period.
You can apply for a second PPP loan if you’ve spent or expect to spend the full amount of your first PPP loan before you receive funding for the second loan.
You can apply for a second loan regardless of whether you request forgiveness on the first loan. However, when applying for a second PPP loan, you must show that your child care business revenue declined by at least 25% in any quarter in 2020 compared to the same quarter in 2019.
Loan Forgiveness Guidance
PPP loans are forgivable under Section 1106 of the CARES Act if used for permitted payroll, rent, mortgage interest and utilities expenses, and if your child care business meets certain workforce and salary maintenance thresholds. Note that you need to provide additional certifications to apply for loan forgiveness and that the SBA can audit the use of loan proceeds, as well as whether the loan was necessary.
- You’re required to certify that not more than 40% of the forgiven amount will be used for non-payroll costs.
- For second draw loans over $150,000, you need to submit your first draw forgiveness application before or with your second draw forgiveness application.
- You have 10 months after the proceeds are used to apply for forgiveness and lenders have 60 days to review your application. The SBA has an additional 90 days to determine forgiveness eligibility.
- Furloughed employees are considered the same as actively employed personnel and you can include them in your payroll calculation if that amount does not exceed $100,000 on a prorated basis.
- The documentation for applying for forgiveness depends on the size of your loan and other factors.
- For more details on loan forgiveness and to apply, visit the SBA site.
How to Apply for a PPP Loan
The deadline to apply for either a first draw or second draw loan is March 31, 2021. Note that to apply, you need to make a number of certifications, including that economic uncertainty due to COVID-19 makes the loan necessary to support ongoing business operations.
To apply for a first draw loan, visit https://www.sba.gov/document/sba-form-2483-ppp-first-draw-borrower-application-form.
To apply for a second draw loan, fill out this form on the SBA website.