January 5, 2021
Dear MSHP Member,
I am writing to share an update on the federal government’s Paycheck Protection Program (PPP) and new loan information. Among the new provisions in the $900 billion coronavirus relief bill is an extension of the Paycheck Protection Program allowing for another $284 billion in forgivable, federally-backed loans for small businesses.
Paycheck Protection Program Round 2 Requirements
The new round of PPP, or PPP2, will be made available to first-time qualified borrowers and to borrowers that previously received a PPP loan.
Borrowers can receive up to $2 million if they meet these requirements:
- Businesses with 300 or fewer employees
- Have used or will use the full amount of their first PPP loan
- Can show a 25% gross revenue decline in any 2020 quarter compared with the same quarter in 2019
PPP2 Loan Terms
As with the first loan, the costs eligible for loan forgiveness in PPP2 include payroll, rent, covered mortgage interest, and utilities. Unlike the first round, PPP2 will cover expenses such as cloud computing or remote-work software, personal protective equipment, and insurance benefits (group life, disability, vision, or dental insurance.)
Additionally, the Act replenishes the EIDL Advance fund, which permits small businesses suffering a substantial economic injury to apply for an advance that does not need to be repaid of up to $1,000 per employee limited to $10,000 total. (Prior law stated that any EIDL Advance received would reduce PPP Loan Forgiveness, essentially requiring the Advance to be repaid.)
To be eligible for full loan forgiveness, PPP borrowers will have to spend no less than 60% of the funds on payroll over their coverage period. The coverage period begins the day the borrower receives the funds and ends on any day selected by the borrower, but no earlier than 8-weeks from the date the loan is received and no later than 24 weeks from the date the loan is received.
Next Steps
The updates to the PPP program are reflected in the Consolidated Appropriations Act, 2021, signed by President Trump on December 27, 2020. The legislation directs the U.S. Small Business Administration to establish regulations within 10 days of enactment of the bill. We will share updates as they are issued and inform you when the application process opens. In the meantime, be prepared to apply by taking these steps:
- Review your quarterly income for 2020 versus 2019. You will have to certify at least a 25% drop in gross revenue for at least one quarter in 2020 when compared to that quarter in 2019
- Contact your current or potential lender; local banks, community lending institutions, credit unions and ask if they are participating in PPP2 lending
-
Visit the SBA website and check for PPP2 updates
Provider Relief Fund Update
Additionally, as part of the coronavirus relief bill, The U.S. Department of Health & Human Services (HHS) will distribute an additional $3 billion to the Provider Relief Fund. We are waiting on HHS guidance and will update you on the application process as details become available.
Sincerely,
