The Paycheck Protection Program reopened this week, and businesses and nonprofits would be smart to get their loan applications in ASAP. The application period runs through March, but the $284 billion appropriated by Congress could go quickly.
That was one of the messages in a discussion during last week’s Business Over Breakfast, a Jackson Hole Chamber of Commerce event held via Zoom.
“Do not wait around,” said Chris Eyler, the U.S. Chamber of Commerce executive director with responsibility for the northwest, including Teton County.
He alluded to the deluge of PPP applications when the program debuted in April, offering low-interest loans that are forgivable if recipients follow certain rules. The initial appropriation of $349 billion was snapped up in a few weeks, and the Small Business Administration stopped accepting new applications until Congress replenished the pot.
“As we saw last spring when they opened the Paycheck Protection Program, the money went very, very quickly,” Eyler said.
PPP loans are backed by the SBA, but banks handle the applications and processing.
In addition to first-time applicants the PPP loans this time are open to certain hard-hit businesses and nonprofits that received a loan last year and have exhausted the funds.
To qualify for the “second draw,” PPP applicants must have fewer than 300 employees, must maintain employee and compensation levels for the covered period, must have used their loan for eligible purposes and must have seen gross profits drop more than 25% in a quarter of 2020 compared with the same period in 2019.
Loans for second-draw borrowers can be as much as $2 million. First-time borrowers can have up to 500 employees and borrow up to $10 million.
For any borrower who wants the PPP loan to be forgiven, one rule hasn’t changed: The recipient has to use 60% of the proceeds for payroll.
The new law attempts to address the particular struggles of hotels, restaurants and bars: They can get PPP funding for 3.5 times average monthly payroll costs. For other companies it’s 2.5 times.
The law expands the list of non-payroll expenses that can be paid for with the other 40%. In addition to utilities, rent and mortgage interest they now include certain supplier costs and operations expenses as well as COVID-19 worker protections like sneeze guards, drive-thru windows and personal protection equipment.
In other changes the new law says regular business expenses paid for with past or future PPP loans are deductible for tax purposes. And if a business or nonprofit received an Economic Injury Disaster Loan grant, the amount of its PPP forgiveness will no longer be reduced by the amount of the grant.
Another part of the law provides that a simplified one-page application process will be created for those with a PPP loan of less than $150,000.
Other provisions of the law increase the employee retention tax credit for Jan. 1 through June 30 and enable a greater number of employers to take advantage of it. In addition, employers can receive the tax credit as well as a PPP loan, though not to cover the same payroll expenses.
The new law also created a $15 billion grant program for museum operators, movie theaters and live performing arts venues whose revenue has dropped by 25% or more.