The ever-evolving landscape of PPP loans took another turn last week when the President signed COVID relief legislation.  Probably the most widely publicized provision was the opening of another round of PPP loans.  Just as important however, Congress clarified that any expenses paid with forgiven loan proceeds will be fully deductible, overriding IRS’s earlier position to the contrary.  In addition, more non-payroll costs were added to the list of forgivable expenses, and the deadline to restore headcounts was extended.  The rule changes will apply to first round loans as well as new loans in the second round, but only if SBA hadn’t signed off on final forgiveness approval by December 26^th.  If you didn’t think you qualified for full forgiveness under the prior rules, you should look into these changes to see if they’ll help.

If you were eligible for the first round of PPP loans but didn’t take one, in most cases you’re out of the running for a second round loan (there are a few exceptions).  If you DID take a PPP loan last year, you may be eligible for another one if your gross receipts for any given quarter in 2020 were at least 25% lower than the same quarter in 2019.  Loans are still generally limited to 2.5 times your average monthly payroll, but you have the option to use either 2019 or 2020 payroll as the base period.

As before, borrowers in the second round must certify that the loan is “necessary” for the continued operation of the business.  The word “necessary” however, is not defined.  Before you simply take the view that “necessary” is in the eye of the beholder, consider that SBA may be a lot stricter this time around; you’d better have a good reason if you’re ever asked to justify your loan request.

SBA has until January 6^th to issue guidance for the new round of loans which will almost certainly bring even more changes, but then we expect lenders to open their application process soon after.  Funding is substantially less than last year, so if you have any thought of applying for a first or second loan, it is important to prepare now so you are ready to go just as soon as applications open.

These are just a few of the highlights of the new PPP provisions.  There are many more issues surrounding eligibility and forgiveness which you need to understand in detail before diving in.  If you would like to learn more or could use some help getting ready to apply, please contact us.