How to Quality for PPP Round 2

Originally Published : January 13, 2021

This is a special edition of our newsletter to address the upcoming PPP.  So, here’s Joseph Levey with the latest…

Joey Regs says….

It’s Déjà vu, all over again. 

It’s now 2021, yet here I am, telling you about this new and [still] constantly-evolving forgivable loan program called the PPP.  As we teased a few weeks back, our Dearly Electeds finally got their collective heads out of you know where and passed a new stimulus/relief package.  And yes, there was a PPP: Part Two included within it.

As discussed previously, there are some nice additions to this new version, and we will highlight them again below, along with some recent updates that were just made, to provide some more clarity.  Before we jump into that, however, the limited window to apply for another pull of PPP starts this week!  Today is open season for those that did NOT get PPP in its first iteration; then PPP “Second Pulls” can apparently begin as early as Wednesday, January 13th (provided your bank is ready for it).  *SPOILER ALERT* As of Friday, NO BANK WAS GOING TO BE.

We told you earlier that we’d be ready to assist [again] for those of you that needed it, and, as promised, we are now standing by.  EVERYONE who we assisted in securing their first PPP loan(s) should have received an email from the team at Scotto & Melchiorre this past weekend about how to prepare for PPP2.  If you did not receive the email, please contact [email protected] immediately, and we will make sure that you get sorted out appropriately.

For those of you who did not use us for the first go-around, but would like our assistance now, please feel free to reach out to me directly.  Please use our dedicated email of: [email protected] for this and we will get the ball rolling with you quickly.

Timing is key here, so if you are interested in engaging us to assist you, please contact us immediately.

Now, onto the goods…

How to Qualify for the Second Draw?

 Your business must:

  • Have 300 or fewer employees [per location];
  • Have used OR will use the full amount of the first PPP loan received [on eligible expenses] on or before the expected date for the second PPP loan to be disbursed to you;
  • Have experienced a revenue reduction of 25% or more in all or part of 2020 compared with all of part of 2019 – This is calculated by comparing gross receipts in ANY 2020 quarter with an applicable quarter in 2019, OR  a borrower that was in operation for all four quarters of 2019 can just submit copies of its annual tax forms that show a reduction in annual receipts of 25% or greater in 2020 compared with 2019. PPP first draw loans are NOT to be included in 2020 calculations.

Details of the Second Draw:

  • These Second Draws will be for a maximum of $2,000,000 – different than the original draws, which could have been for up to $10,000,000. (Side note: if you are applying for a First Draw now, you may still pull up to the $10,000,000 max). 
  • The loan amount that you are eligible for is up to 2.5X your average monthly payroll costs (with a cap per employee of $100k annualized)
    • NEW CLARIFICATION: You can use 2019 OR 2020 for this calculation
      • This is especially important when you consider the new carve-out for hospitality businesses specifically, which allows you to received 3.5X instead of 2.5X
      • To be super clear here: you should be able to get MORE $ this time around
  • You must STILL adhere to the 60/40 ratio of payroll costs (60%) and other approved costs (40%) to achieve 100% forgiveness, HOWEVER, the items in the “Other Approved costs” category have been expanded to our collective benefit.  “Other” may now include:
    • Worker protection and facility modification expenditures – such as personal protective equipment to comply with federal health and safety guidelines;
    • Property damage costs related to any vandalism, looting or other public disturbances in 2020 that were otherwise not covered by insurance or other compensations
    • Expenditures to suppliers that are essential at the time of purchase to the recipient’s current operations **Hospitality people: This means paying vendors**
    • Certain operating expenditures, including business software or cloud computing services 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.
  • You still have to spend the funds within a covered period between eight or 24 weeks to be eligible for full loan forgiveness

Let’s go, folks!  It’s not time to quit just yet!  We’ve all come this far.  Let’s go get this new $, spend it wisely, and get through this long, cold winter.  If we can do that, we might just be able to put this nightmare behind us.