Greetings and Happy New Year! We hope you had a safe and happy holiday season.
As you likely know, Congress passed a new Federal Stimulus Bill in late December which was signed by the President on December 27. While full details have not yet been released, it has been confirmed the bill includes another $284 billion for additional potentially forgivable loans under the Paycheck Protection Program (PPP).
Details and processes for the second round of PPP Loans have not yet been released — but here’s what we know so far:
A “second draw” will be allowed for those who previously received PPP loans — if you have fewer than 300 employees and are able to demonstrate a revenue loss of 25% of more in one quarter of 2020 as compared to the same quarter in 2019. Details of the 25% test have not yet been provided.
First-time PPP borrowers will also be welcome, subject to PPP eligibility rules.
For most organizations, PPP amounts will again be based on 2.5 times average monthly payroll. In recognition of the impact on the restaurant and hospitality industry, businesses with NAICS code 72 will be eligible for loan amounts of 3.5 times average monthly payroll.
Eligible uses of funds have been expanded to include “operations expenses,” “supplier expenses,” and “worker protection expenses.” The requirement that 60% of eligible expenditures are payroll-related remains unchanged.
In addition to the new round of PPP, Congress has made several changes to the PPP Forgiveness process for both new and existing loans.
The Small Business Administration (SBA) will create a streamlined forgiveness process for loans of less than $150,000. Borrowers will simply need to complete a one-page certification attesting compliance with program requirements, along with supporting documentation.
The Economic Injury Disaster Loan (EIDL) Advance deduction from PPP forgiveness was repealed in this legislation. This means our EIDL Advance will no longer be deducted from your forgiveness amount. This applies to both those of you who have not yet filed for forgiveness AND anyone who has already processed forgiveness paperwork. There is no word on how advance amounts that have already been deducted will be handled. If this impacts your personal situation, we will give you the details as soon as we are given them.
The bill also reversed a previous IRS rule prohibiting the deduction of expenses paid for with forgiven PPP loan proceeds. You will now be able to deduct those expenses on your 2020 taxes.
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So…that’s all we know for now.
As of today, there are no additional details on how the process for this round of PPP loans will work or when the process will begin. Rest assured, however, that as your community bank, we will continue to keep you informed when more information becomes available. If you have any questions, please feel free to contact Andrew Richardson at 603-355-1614, or you can email him.
Senior Vice President/ Senior Lender