President Trump signed a $900 billion stimulus package that will prevent the looming government shutdown, extend a moratorium on evictions, and provide new life to the Paycheck Protection Program (“PPP”) created in March of 2020. This relief comes just in time for many American small businesses.
This “second draw” is for eligible businesses that obtained the PPP funds in the first round of funding but are still struggling to stay open. It will provide loans up to $2 million dollars for small, hard-hit businesses that previously applied and received PPP loans. Eligibility requirements that must be met to receive the second round of funding include: 1) the business must employ less than 300 employees and must have already used, or intend to use, the full amount granted in their first PPP funding round; and 2) the business must show that it suffered a 25% reduction in gross receipts during the first, second, or third quarter of 2020 as compared to its gross receipts for the same quarter in 2019 An eligible entity is only eligible for one second draw from the PPP funds.
Companies that missed out on the first round of PPP loans or returned its loan due to early uncertainty in Small Business Administration guidelines are eligible for this round of relief.
The bill specifically addresses economic aid to minority-owned businesses, nonprofits, and venues such as music and movie theatres. The focus of this round of PPP relief is truly for small businesses in which COVID-19 has had a significant negative impact. According to Forbes, the allocations are as follows:
- $35 billion for first time PPP borrowers, $15 billion of which for smaller, first time borrowers with ten or fewer employees, or loans less than $250,000 in low income areas;
- $25 billion for second draw PPP loans for smaller borrowers with 10 or fewer employees, or loans less than $250,000 in low income areas;
- $25 million for Minority Business Development Centers program under the Minority Business Development Agency;
- $57 million for the Microloans; and
- $50 million for PPP auditing and fraud mitigation purposes.
The bill also expands on what items may be “allowable expenses” for PPP forgiveness purposes. Some of these additional items include costs related to property damage due to civil unrest that occurred in 2020 and not covered by insurance, expenses for software, accounting, cloud computing, human resources, personal protective equipment, and supplier costs that are essential for operations.
The hard-hit restaurant and service industry may receive loans of up to 3.5 times their average monthly payroll costs.
There are many nuances and complexities included in the new law and the Small Business Administration will release a new set of guidelines in the next few weeks.
If you need assistance preparing your application or would like to discuss your options, please feel free to reach out to the team at Quinlivan & Hughes, P.A. for assistance.