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Paycheck Protection Program Famously Known as PPP Loan is kind of loan that can help small businesses pay for their payroll and help them not get shut down due to current situation.
Additional funding Notification! The March 11 signing of the American Rescue Plan brings an additional $7.25 billion as PPP Loan. The last date they are accepting application will have to be applied on or before March 31, 2021.
Does your business affected by Covid-19 situation, and required financial assistance in order to get back in business. If this is the case then one of the biggest federal initiative for small business is paycheck protection program also known as PPP Loan.
If you are business owner who is suffering to Covid situation and want to get back in your business, Let me introduce you with this Program.
What is the Paycheck Protection Program?
The Paycheck Protection Program (PPP Loan) provides forgivable loans to small businesses to help cover up to 24 weeks of payroll costs and qualifying non-payroll costs. PPP is a small business relief measure that incentivizes businesses to retain employees on payroll.
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Here are some quick facts about the Paycheck Protection Program (PPP Loan) – related legislation signed into law:
- Coronavirus Aid, Relief, and Economic Security (CARES) Act: Established the PPP on March 27, 2020 ($349 billion)
- PPP and Health Care Enhancement Act: Gave the program a surge of additional funds ($310 billion) on April 24, 2020
- PPP Flexibility Act: Made important changes to the program, making PPP loan forgiveness easier on June 5, 2020
- Consolidated Appropriations Act (the Act): Established PPP 2.0 ($284 billion) and expanded the PPP on December 27, 2020; the portion relating to the PPP and other small business support is also called the “Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act”
- American Rescue Plan: Provided $7.25 billion in additional funding to PPP 2.0. This plan did not extend the program deadline set under the Consolidated Appropriations Act.
That means you have deadline to apply until March 31, 2021 to apply for your first or second Paycheck Protection Program.
Where can employers exactly spend PPP funds?
If you take PPP Loan you need to spend it on qualifying expenses like employees’ payrolls, If you want your loan to be forgiven. However you can spent portion of the loan on non-qualifying expenses, that portion will not be forgiven and you need to pay that part.
For PPP Forgiveness, use the loan on following expenses.
- Payrolls (60% of loan proceeds)
- Salaries, wages, commissions, or tips ($100,000 max per employee—gross earnings)
- Employee benefits (e.g., vacation; sick leave; health care benefits; retirement benefits; and group life, disability, vision, and dental insurance)
- State and local taxes
- Non-payroll costs (40% of loan proceeds)
- Interest on mortgages
- rent
- Utilities
- Covered operations expenses such as business software or payroll tracking expenses
- Covered property damage like vandalism or looting
- Supplier Costs
- Worker protection expenditures (Safety Gadgets and Equipment.)
Make cautious calculation of your expenses, remember individual contractor are not employees they are not on payrolls. So while calculating do not include their payments in payroll costs.
Second-time borrowers
The great thing about Paycheck Protection Program 2.0 is that employers who already took out a loan in 2020 may be eligible. This is known as “Second Draw” PPP loans.
To be eligible for a second PPP loan, you must:
- Employ 300 or fewer employees
- Have used up your first PPP loan proceeds
- Demonstrate that your gross receipts in any 2020 quarter are at least 25% less than the same 2019 quarter
- Not engage in political or lobbying activities, describe yourself as a think tank, or be affiliated with businesses in China
- Not receive a Shuttered Venue Operator Grant
Who can’t apply for a second draw loan?
There are many persons and entities that aren’t eligible for second draw PPP loans, but these are the most notable:
- Any entity that’s engaged in political or lobbying activities
- Any person or entity that receives a grant for shuttered venue operators
- Businesses that have permanently closed
- Those who have previously received a second draw PPP loan
How should you apply for a second PPP loan?
You can apply for a second draw PPP loan using Form 2483-SD. You’ll use the same eligible payroll costs to calculate your loan amount as you did with your initial PPP loan.
