PPP Second Draw Targets Smaller Businesses for Additional COVID-19 Assistance

               On February 22, 2021, a little more than a month after the U.S. Small Business Administration (“SBA”) began accepting applications for the second round of Payroll Protection Program (“PPP”) loans, the U.S. Department of Treasury is expected to announce that beginning February 24, 2021, new loan applications will only be accepted for employers with 20 or fewer employees. 

                Congress approved funding for a second round of PPP loans at the end of December, committing new funding for a loan program intended to help protect American small businesses and keep employers from having to resort to layoffs or reduced work schedules for their employees in order to manage decreasing revenues during the COVID-19 emergency.

                The PPP program has undergone some significant changes since the program was first initiated in 2020, with businesses being allowed to expend PPP loan funds over 24 weeks, instead of only eight weeks as in the original guidance. The SBA has also extended the term of PPP loans from two to five years, expanded the permissible uses for PPP funds and eased forgiveness requirements by reducing the percentage of loan funds that have to be committed to payroll expenditures from 75 percent to 60 percent in order to qualify for full loan forgiveness.  PPP funds may be utilized not only for employee payroll and benefits, but also for rent/mortgage expenses and utilities and other expenditures made necessary by the continuing pandemic.  So long as the majority of the funding (60 percent or more) is committed to direct employee wages and benefits, employers can qualify to have the loans (which carry one percent interest) fully forgiven. 

                Now with the most recent tweaks to the PPP program the federal government appears – for at least the next two weeks – to be trying to encourage smaller businesses and sole proprietorships to take advantage of PPP financing. Even small businesses that participated in the first round of funding in 2020 can participate in the “PPP Second Draw” if they can demonstrate decreased revenues of at least 25 percent from any one quarter in 2019 as compared to the same quarter in 2020.  For example, if a business earned $100,000 in the third quarter of 2019, it would qualify for a second draw PPP loan if its revenues from the third quarter of 2020 fell to $75,000 or below. 

                Currently, the second round of PPP funding is set to close on March 31, 2021. 

                Gordon & Simmons has assisted clients in navigating the PPP program, and if you are a small business owner or sole proprietor interested in pursuing either a first or second draw PPP loan and have questions or need some assistance in learning more about the program, please contact our office.