How to Apply for Loans Under the Revived Paycheck Protection Program by Andrew Leonard, CPA
Posted on January 14, 2021
by
Andrew Leonard
The Small Business Administration (SBA) and U.S. Treasury Department recently announced the opening dates for the second round of the Paycheck Protection Program (PPP2) and released the application forms small businesses, nonprofits and other qualifying entities should use when applying for first-time and second-draw loans under the revived program.
Lenders with $1 billion or less in assets will begin accepting PPP2 loan applications at 9 a.m. on Friday, Jan. 15, with larger lenders following suit on Tuesday, Jan. 19. The deadline for all borrowers to submit PPP2 loan applications to all qualifying lenders is March 31, 2021.
Similar to the first round of PPP funding, PPP2 provides borrowers with the ability to receive 100 percent forgiveness of loan proceeds they use to retain workers and sustain operations through the ongoing COVID-19 pandemic. More specifically, borrowers must spend at least 60 percent of loan proceeds on payroll costs, including salary, wages, commissions, tips and employer payments of health insurance premiums and retirement plan benefits. The remaining 40 percent of loan proceeds must be allocated to rent, mortgage interest and utilities and/or the costs of covered property damages and supplier costs, cloud computing services and expenses for COVID-19 safety measures, such as sneeze guards and PPE for employees.
One of the key factors differentiating the first PPP from PPP2 is the loan amount, which is reduced from a maximum of $10 million in 2020 to the lesser of $2 million or 250 percent of the business’s average monthly payroll during either:
- the one-year period prior to loan origination, or
- calendar year 2019.
Businesses in the hospitality industry, including restaurants and hotels, may borrow up to 350 percent of their average monthly payroll costs, up to the $2 million maximum.
New Application Forms
Entities that received PPP funding in 2020 may apply for a second-draw loan using newly introduced Form 2483-SD, provided they meet the following eligibility criteria:
- They received a first-draw PPP loan and have used or will use the full amount for authorized uses, including payroll, rent and utilities;
- They have no more than 300 employees; and
- They can demonstrate a 25 percent or more reduction in gross receipts between comparable quarters in 2019 and 2020.
By contrast, applicants making their first requests for potentially forgivable PPP loans, also known as first-draw loans, must do so using SBA Form 2483, which is, in effect, an updated version of last year’s application form. Form 2483 is also required for certain first-round PPP borrowers that did not receive loan forgiveness before Dec. 28, 2020. Under these circumstances, existing borrowers may use Form 2483 to reapply for a first-draw loan, provided they returned some or all of their first-draw funding, or to request a modification to the full amount of the first-draw PPP loan amounts they were eligible to receive but did not accept in full.
About the Author: Andrew Leonard, CPA, is a director with Berkowitz Pollack Brant’s International Tax Services practice, where he provides tax structuring, pre-immigration planning and a wide array of international tax and consulting services to international companies, entrepreneurs, families and foreign trusts. He can be reached at the CPA firm’s Boca Raton, Fla., office at (561) 361-2000 or info@bpbcpa.com.
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