The NEW PPP
The new Covid-19 stimulus act sets aside $35 billion for first-time PPP applicants, with $15 billion of that made in loans for first-time applicants with 10 employees or fewer who made less than $250,000 to businesses in low-income areas.
How do you qualify for the new second round of PPP money? To qualify, you must
- Did not apply for the first round of PPP money in 2020.
- Have 300 or fewer employees
- Have suffered a 25% or greater loss in revenue during at least ONE quarter of 2020 when compared to 2019
- Have already used your original PPP money or planning to use it soon.
For example, Betty’s third-quarter 2019 revenue showed $2million and here the third quarter of 2020 should $1,500,000. Betty meets the25% or greater test and qualifies for the second round of PPP money.
If your business did not operate in 2019 there are other tests to run to show if you qualify. For example, comparing the fourth quarter to either the first, second, or third quarter of 2020.
The loan amounts follow the same rules set for the first round. The loans are capped at $2 million or less; if you are not a hotel or restaurant, i.e., North American Industry Classification System (NAICS) code72, you identify your average monthly payroll for either 2019 or trailing 12 months, and then multiply it by 2.5 to find your loan amount; and if you are a hotel or restaurant, you multiply by 3.5.
What can the PPP money be used for? During a period of their choice, beginning eight weeks from the origination date of the loan and ending24 weeks from the origination date, you must use 60% or more of the monies for payroll to achieve 100% forgiveness. Some of the other covered expenses are:
- Interest on mortgage obligations
- Operations Expenditures
- Property Damage
- Supplier costs
- Worker protection.
Before the recent stimulus, the IRS took the stand that, if your PPP loan was forgiven, the expenses used with that money could not be written off. Some lawmakers disagreed with the IRS. Now thanks to the new law, expenses paid with PPP loan monies that are forgiven are tax-deductible.
If you qualify, you need to act fast. Once the money is gone, there will be no more.