• Christopher Keleshyan

The second round of PPP loans opened on January 11, 2021

The SBA issued new guidance on January 6, 2021 around the additional funds for the Paycheck Protection Program (PPP) that are included in the Economic Aid Act, signed into law on December 27, 2020.

  • The Paycheck Protection Program will re-open on January 11, 2021.

  • Community financial institutions can make loans to new borrowers beginning January 11, and to those who have already received a PPP loan beginning January 13. Shortly after that, the program will reopen to all participating lenders.

  • If you did not receive a PPP loan from the CARES Act (passed in March 2020), you can apply for one now.

  • If you received a PPP loan from the CARES Act, and you experienced a 25% reduction in revenue in at least one quarter of 2020 compared with the same quarter in 2019, you can apply for another loan.

  • If you already applied in round one and are applying for a second loan of $150K or less (based on 2.5 times 2019 payroll), you do not have to submit new documentation if you’re going through the same lender. Your lender can ask for additional documentation, however, and you will have to document your decreased revenue when you apply for forgiveness.

  • Some loan criteria have been relaxed. Some operations expenses, supplier costs, and other expenses are covered, and some non-profits and other types of organizations are now eligible.

  • Round two loans are available for a maximum of $2M.


More Paycheck Protection Program money


The new bill provides for $284 billion in additional funds for the Paycheck Protection Program. This includes $12 billion that is specifically earmarked for minority-owned and very small businesses, through community-based lenders like Minority Depository Institutions and Community Development Financial Institutions.


If you were not eligible for a PPP loan the first time around, you may be this time. Eligibility has been broadened for some types of businesses.


If your business has already received a Paycheck Protection Program loan, you can apply for another one from this new round of funding. You’ll need to show that your 2020 revenues declined significantly from your 2019 revenues. For most businesses, this won’t be much of a challenge.


There will also be another $20 billion available for grants through the Economic Injury Disaster Loan program, which is administered by the Small Business Administration. Some businesses were shut out of EIDL grants earlier this year when funding ran out.


Relief for freelancers


The new package includes additional relief for freelancers, independent contractors, gig workers, and the self-employed who have been receiving unemployment benefits under the Pandemic Unemployment Assistance program. It provides an additional 13 weeks of payments after state benefits have been exhausted.


Because the new bill was not signed before the existing benefits expired, there will be a lapse in benefits while states reprogram their systems. But benefits will be retroactive once they are back up and running.


If you qualify for these benefits but have not yet applied, you have until the middle of March to do so. If you’re currently receiving benefits, the additional funds will be phased out at the beginning of April.


Expenses covered by PPP loan proceeds are now deductible


The new stimulus package includes an important provision for those who have received PPP loans already, or for those who will be receiving them this time around. The new bill stipulates that payroll, rent, and other expenses that can be paid with PPP loan proceeds can still be deducted as a business expense on the business’s tax return, just as they would have if there had been no loan proceeds.


The new bill does not address the deductibility of expenses paid for by a PPP loan that has already been forgiven, but it’s likely this will be addressed later.


Consult your tax advisor


The Paycheck Protection Program and other stimulus programs are uncharted territories for businesses and for the IRS. Be sure to consult with us about how these programs impact your tax liability.


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By: Christopher Keleshyan MBA, EA




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