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What you need to know to apply for the new round of Paycheck Protection Program (PPP) Funds
The U.S. Treasury Department and the SBA reopened the Paycheck Protection Program (PPP). This opens the way for “First Draw” and “Second Draw” PPP loans.
By Andrea MacDonald, CPA
If you are a small business, listen up! The Small Business Administration (SBA) has some great news for businesses that are still struggling through the pandemic. In December 2020, Congress voted to allocate an additional $284 billion to the Paycheck Protection Program (PPP). The PPP is a forgivable loan program established by the CARES Act. The SBA and the Treasury Department have reopened the PPP loan portal, so small business owners, like you, will be able to apply for extra aid.
You’ll have to act fast, though, because the deadline for new loan applications is March 31, 2021.
During the first round of the PPP, you didn’t have much information about applying for loans.
To make it easier for you this time, we’ll go over the types of loans available and what you’ll need to apply. And if you’re a small business owner, we’ll also address updates to the PPP and what you need to know. Then, if you have more questions, reach out to an accounting firm like Pro Tax & Accounting! We can help you find the resources to apply for the loan and the information you will need for loan forgiveness.
Key updates to the PPP program:
First Draw Loans:
These are for your small business that did not take out a PPP loan in 2020. Businesses that have 500 or fewer employees are eligible to apply for first draw loans. This includes nonprofit organizations, independent contractors, and other small businesses. Some businesses that received PPP loans in 2020 may also be eligible for a first draw loan. This applies to businesses that didn’t receive loan forgiveness or didn’t accept their full loan amount. If you qualify, you can apply again now. Businesses can use PPP loans to cover payroll costs, rent payments, operational expenses, and more. If this applies to your business, here is the link to the SBA First Draw Loan information.
Second Draw Loans:
Did you receive a loan during the first round of the PPP in 2020? If so, you’re in luck. The SBA has opened up second draw loans for businesses that continue to need financial help. You may qualify for a second draw loan if you have spent the entirety of your first loan on eligible expenses. You must also have no more than 300 employees, and have lost at least 25% in quarterly revenue between 2019 and 2020. The general spending requirements for first and second draw loans are the same. If you want to apply for a Second Draw Loan, here is the link to the SBA information.
The SBA wants small businesses to have greater access to loans this time around. That’s why the agency has set aside at least $15 billion in first draw loans and $25 billion in second draw loans to specifically help small businesses. Some of this money will cover loans to businesses with no more than 10 employees. The rest will cover loans of up to $250,000 to businesses in low or moderate-income neighborhoods.
PPP Loan Forgiveness:
All PPP loans are forgivable if your business follows certain requirements. As a business owner, you can set your PPP loan to cover any period from 8 to 24 weeks, depending on your needs. During that time, you must then maintain your employee and compensation levels. You must also spend at least 60% of the loan on payroll costs, and use the rest to cover other eligible expenses. To help you, here is the link to the SBA PPP Loan Forgiveness information.
How and when to apply for first and second draw loans:
When the CARES Act first established the PPP in 2020, many business owners scrambled to apply for loans. Unfortunately, there wasn’t much time to prepare. But now that we know more about how the PPP works, you should have the following records ready to go:
You will need the following records for 2019 or 2020, depending upon your chosen period.
- Tax returns
- Rent and utility payments
- Payroll information
- Employment records
- Profit and loss records
For businesses seeking second draw loans, profit and loss records are especially critical. To qualify for a second draw loan, you need to prove that you incurred a loss in revenue between comparable quarters in 2019 and 2020. We recommend that business owners work with tax or accounting professionals to organize these documents.
Again, the deadline to apply for PPP loans is March 31, 2021.
Despite this deadline, we recommend getting your application in as soon as possible. You can apply for a PPP loan through any participating community development financial institution, community bank, credit union, Farm Credit System institution, or larger bank. If you need help finding a participating lender, you can use the SBA Lender Match tool. You can then submit your borrower application form to the lender(s) you’ve matched with. At Pro Tax & Accounting, we can also help you find a participating financial institution. Here is a link to find Eligible Paycheck Protection Program Lenders.
The coronavirus pandemic has left many small businesses in need of financial help. We know it has been hard for your business to survive. If you are a small business owner looking for aid, submit your PPP loan application as soon as possible! And if you have any more questions about the program or how to apply, give Pro Tax & Accounting a call today. We’re here to help, and we can provide you with the resources you need to apply for a loan. We want your business to survive, succeed and grow, so we are here to help. Call us. (757) 420-1539
If reading this has created more questions and you need help, contact our office. Call (757) 420-1539
Andrea MacDonald, CPA is the owner of Pro Tax & Accounting in Chesapeake, Virginia. For nearly two decades, she has been working with businesses on their bookkeeping, accounting and taxes. She also works with individuals and families on their tax returns. Andrea is a Certified Public Accountant (CPA) and a qualified bookkeeper and tax professional. She is well-versed in tax law, which makes her an invaluable resource for any business.
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Pro Tax & Accounting is your go-to team for E-Commerce Tax Laws, accounting services, business bookkeeping, QuickBooks Consulting, payroll, and tax services. President and owner, Andrea MacDonald, CPA, is a Certified Public Accountant. Andrea and her team have the education, experience, and knowledge. They work with businesses throughout the Hampton Roads Virginia cities of Norfolk, Virginia Beach, Chesapeake, Suffolk, Hampton, and Newport News, north into Williamsburg and throughout the mid-Atlantic region. And thanks to technology, Pro Tax & Accounting can work with clients anywhere in the world!
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