The 2021 Consolidated Appropriations Act (CAA) with funding to reopen the Paycheck Protection Program (PPP)

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Small businesses struggling from the COVID-19 shutdowns are getting another round of financial help with the latest spending bill passed by Congress. Of the $900 billion approved for COVID-19 relief, $284 billion is slated for the Paycheck Protection Program, with some changes.

The PPP 2 IFR provided initial guidance surrounding eligibility, amount, forgiveness, and the application process for the PPP 2 Loans. On January 8, 2021, the SBA issued a press release stating applications for First Draw PPP loans will begin to be accepted on Monday, January 11, but only by community financial institutions (CFI). PPP 2 Loans will begin to be accepted on Wednesday, January 13, but again, only CFIs will be accepting applications for the first two days. After the CFI preference period expires, all approved lenders will be allowed to make First Draw and PPP 2 Loans. The SBA also released an IFR on First Draw PPP loans, an updated version of the Form 2483 PPP borrower application form, and the new Form 2483-SD, which is the application form for PPP 2 Loans.

To qualify for this latest round of PPP funding, business owners must prove:

  • The business was operating before February 2020
  • Has fewer than 300 employees
  • Gross income must have fallen 25% or more from any quarter in 2019 to 2020

The new loans will be tax deductible and people can apply even if they previously applied and got a PPP loan from the first round. Nonprofits can also now apply for a loan.

In general, the maximum PPP 2 Loan amount is the lesser of 1) 2.5 times the borrower’s average monthly payroll costs or 2) $2 million. Payroll costs are defined the same as for First Draw PPP loans. However, the PPP 2 IFR allows a PPP 2 Loan borrower the option to use either its calendar 2020 or 2019 payroll for purposes of the average monthly payroll calculation.

Regardless of the period used, the same $100,000 annual compensation limit applies. Other notable items include:

  • Borrowers that fall under NAICS code 72 can calculate their PPP 2 Loan based on 3.5 times average monthly payroll
  • For self-employed farmers and ranchers who file Schedule F, the loan calculation was changed by the CAA. These borrowers may now base both First Draw and PPP 2 Loans on gross income, not net profit, reported on the 2019 or 2020 Schedule F, but still limited to 2.5 months with a $100,000 annual gross income cap.
  • Corporate groups that were subject to the $20 million limit on total First Draw PPP loans have a $4 million limit on PPP 2 Loans

The new loans are capped at $2 million. The deadline to apply for this latest round of support is March 31, 2021, using Form 2843-SD.

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