Now that specifics are out for the second Paycheck Protection Program (PPP) round, there are some important things you need to know. One is the 25% loss in receipts rule.
25% Loss of Revenue Requirement
In order to receive a second PPP loan, your business must demonstrate they have experienced a decline of 25% or more in gross receipts from the same quarter in 2019. In other words, if you your gross receipts in the third quarter of 2020 were 25% less than the third quarter in 2019, you qualify for a second loan. Even if you earned more in quarters one, two, and four, you still qualify based on the decrease in the third quarter.
The 25% Test - Generate this Report
How do you figure out if you meet the criteria? We took the work out of it for you and created a report in QuickBooks. To generate the report, you need to:
- Open your QuickBooks Online file
- Copy the link below and copy the URL into your browser and press enter
QBO REPORT LINK: QuickBooks (intuit.com)
Other Important Changes
In addition to the reduction in gross receipts, previous PPP loan borrowers can apply for an additional loan of up to $2 million, if they also meet the following requirements:
- Have 300 or fewer employees
- Have used, or will use, all proceeds from their first PPP loan
The Nitty Gritty
In addition, the following stipulations apply to this round of PPP loans:
- The PPP-2 loans cannot exceed $2 million.
- The loan is based on 2.5 x average monthly payroll costs in one year prior to loan or calendar year 2019. If you have a NAICS code starting with 72 (i.e., hotels and restaurants), the loan is based on 3.5 x average monthly payroll costs.
- Similar to the first round of PPP loans, eligible spending must be comprised of at least 60% on payroll costs (compensation, health, retirement and state and local payroll taxes) over a Covered Period of either 8 or 24 weeks.
Other Good News
PPP-2 will permit:
- First-time borrowers with 500 or fewer employees that are eligible for other SBA 7(a) loans
- Loans for sole proprietors, independent contractors, and eligible self-employed individuals
- Not-for-profits (including churches)
- Additional covered expenses such as personal protection equipment and modification to facilities (think barriers, floor stickers, air filtration, etc.)
- Operating costs such as software, cloud computing services, and accounting needs
- Costs related to property damage from vandalism and looting in 2020 are covered expenses
- Expenses paid with PPP monies are tax deductible in addition to being forgiven
- EIDL advances will not reduce your PPP forgiveness amount
- Simplified forgiveness application is now available for loans $150,000 or less and require little in the way of documentation
In the simplest terms, if you experienced a loss of at least 25% in gross receipts in one quarter, have 300 employees or less, AND have used all of the proceeds from your first PPP loan, you qualify for a second PPP loan.
We can help you navigate the PPP-2 process or assist you in applying for forgiveness from your first PPP loan. Reach out to us at www.budgetease.biz to get started.