PPP Loans Are Now Available, Both First Draw and Second Draw PPP Loans
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Last Friday, the Small Business Administration (SBA) announced that the Paycheck Protection Program (PPP) will reopen this week with First Draw PPP loans to be available starting on January 11 and Second Draw PPP Loans to be available starting on January 13.
The PPP was renewed with the Economic Aid to Hard-Hit Small Businesses, Non-Profits, and Venues Act, which was part of the Consolidated Appropriations Act, 2021, which was finally signed by President Trump on December 28, 2020, after passing Congress on December 21, 2020.
The terms of the First Draw PPP loans are based on similar terms as were previously made available under the Coronavirus Aid, Relief and Economic Security (CARES) Act, which was enacted in the wake of the coronavirus pandemic, and which was subsequently made more flexible under the Paycheck Protection Program Flexibility Act.
The eligibility terms of the Second Draw PPP loans are similar to the First Draw PPP loans. However, there are a number of key differences. Second Draw PPP loans are limited to borrowers of no more than 300 employees instead of the 500 employee limit for First Draw PPP loans. Second Draw PPP loans require the employer to experience revenue reduction in 2020 relative to 2019. This can be shown either as a 25% revenue reduction in a quarter comparison or for the full year. The borrower must have received a First Draw PPP loan, and used or will use the full amount of the First Draw by the expected date of the Second Draw. Second Draw PPP loans are also limited to a maximum of $2 million.
The SBA has issued guidance to facilitate the updated PPP loan process. See https://home.treasury.gov/system/files/136/PPP-IFR-Paycheck-Protection-Program-as-Amended-by-Economic-Aid-Act.pdf; https://home.treasury.gov/system/files/136/PPP-IFR-Second-Draw-Loans.pdf.
If your organization needs assistance in determining if you qualify for ERC, contact us to go over step-by-step instructions for how to take advantage of the ERC, including calculating your potential ERC refund, optimizing an ERC strategy that accounts for PPP loan forgiveness, and maximizing your potential credit, all while minimizing your IRS audit risk.
