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Paycheck Protection Program renewed – here’s what you need to know.

Paycheck Protection Program renewed – here’s what you need to know.

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Paycheck Protection Program renewed;
here's what you need to know.

Summary: The PPP re-opens through community financial institutions like CDFIs on Monday, January 11th for first-time borrowers, then for second-draw borrowers on Wednesday, January 13th. Other lenders will start accepting PPP applications at a TBD date soon after. The program closes on March 31st, 2021.

Note: We're sharing info as we receive it and will update this post regularly. When we have guidance from the SBA in the form of FAQs, we'll share those with our mailing list and link to them here.

If you'll be applying for a second draw, you should read this blog post, too.

Further assistance: If you still have questions about the PPP after reading this blog post, please reach out to us by phone at (315) 443-8634 or email. Our advisors are here to help you navigate this program. If you're working with a WISE counselor, they can assist you, too.

PPP: The basics

Congress passed a new spending bill which includes provisions to restart the Small Business Association’s Paycheck Protection Program. This program provides loans to small and medium sized businesses to help keep their workforce employed during the pandemic and help mitigate the economic impact of the pandemic. The SBA is expected to release public-facing guidance and FAQs soon, which we'll send out to our clients ASAP. This post covers what we know so far, and what you can do to prepare if you're thinking about applying.

Here are some basics about how the new spending bill impacts the SBA's Paycheck Protection Program:

  • The program reopens on 1/11/21 for first-time borrowers, and on 1/13/21 for second draw borrowers only through community financial institutions like CDFIs. Other SBA-approved lenders will begin accepting applications soon after (date TBD).
  • The program closes March 31st, 2021. If you're planning to apply, prepare your documentation now and tell your lender of your intent to apply.
  • Businesses who received a loan through the PPP may be eligible to receive a second (called a "Second Draw").
  • In addition to payroll, rent, and utilities, it now also covers some operational expenses, inventory, and protective equipment.
  • Business owners who receive the loan can now claim a tax deduction for expenses paid for using PPP funds.
  • When the program opens, at least the first two days will be reserved for only community financial institutions (in order to give increased access to communities of color, women, and other traditionally disadvantaged groups).

Who’s eligible

This second round of PPP loans are open to the following groups if they were in business on Feb 15th, 2020:

  • Businesses with 500 or fewer employees that are generally eligible for other SBA 7(a) loans.
  • Sole proprietors, independent contractors, and eligible self-employed individuals.
  • Not-for-profits, including churches, business leagues, chambers of commerce, tax-exempt Veteran's organizations, and Tribal business concerns
  • Accommodation and food services operations (those with North American Industry Classification System (NAICS) codes starting with 72) with fewer than 300 employees per physical location.

People who are self-employed (you file a form 1040, Schedule C) are eligible for a PPP loan if they...

  • Were in operation on Feb. 15th, 2020
  • Have self-employment income as a sole-proprietor or independent contractor
  • Reside in the US
  • File a form 1040, Schedule C for 2019

Note: if you're a partner in a partnership, including an llc that files as a partnership, you should submit one PPP loan application for that partnership, not individually as a self-employed person.

Calculating the amount you can borrow

For small businesses:

  1. Aggregate payroll costs for 2019 OR 2020 of US-based employees
  2. Subtract any compensation paid to an employee in excess of $100,000 on an annualized basis, as prorated for the period during which the payments are made or the obligation to make the payments is incurred
  3. Divide by 12 to calculate your average monthly payroll costs
  4. Multiply that monthly average by 2.5
  5. Add any outstanding EIDL you'd like to refinance (must've been made between Jan 31, 2020 and April 3, 2020). Do not include the amount of any advance under an EIDL COVID-19 loan because it does not have to be repaid.

For self-employed people with no employees, here's how you calculate what you can borrow:

  1. Find your 2019 or 2020 IRS Form 1040 Schedule C line 31 net profit amount (if you are using 2020 to calculate payroll costs and have not yet filed a 2020 return, fill it out and compute the value). If this amount is over $100,000,
    reduce it to $100,000. If this amount is zero or less, you are not eligible for a PPP loan.
  2. Calculate the average monthly net profit amount (divide the amount from Step 1 by 12).
  3. Multiply the average monthly net profit amount from Step 2 by 2.5.
  4. Add the outstanding amount of any EIDL made between January 31, 2020 and April 3, 2020 that you seek to
    refinance. Do not include the amount of any advance under an EIDL COVID-19 loan (because it does not have to be repaid)

If you're self-employed and have employees, or are a partner in a partnership, please contact us for info on how to calculate the amount you can borrow.

See the end of this post for two examples. You should work with your accountant to confirm the max amount you may borrow.

Covered expenses

The PPP primarily covers payroll expenses, including salary, wages, commission, cash tips or the equivalent, payment for vacation, family, parental, medical, and sick leave, benefits like health care, life insurance, disability, etc., retirement, and any taxes on those payroll expenses.

For self-employed people, it can be used for wages, commissions, income, or net earnings from self-employment, or similar compensation.

60% of the funds must be used for payroll expenses. The remainder can also be used on:

  • Mortgage interest payments
  • Rent
  • Utilities
  • Interest on other debt incurred before Feb 15, 2020
  • Refinancing an EIDL loan made between Jan 31st, 2020 and April 3, 2020
  • Certain operational expenditures like payments for any business software or cloud computing service that facilitates business operations, product or service delivery, the processing, payment, or tracking of payroll expenses, human resources, sales and billing functions, or accounting or tracking of supplies, inventory, records and expenses
  • Property damage costs incurred in 2020 due to public disturbances
  • Covered supplier costs (essential inventory)
  • Covered worker protection costs (like masks, cleaning supplies)
  • Capital expenditures to change business activities to comply with new regulations around COVID-19 transmission reduction (reconfiguring layout to allow social distancing, refitting HVAC systems, erecting physical barriers, expanding outdoor spaces, etc.)

Loan forgiveness

The SBA will soon release specific guidance around loan forgiveness, both for first draw PPP loans and second draw. In the meantime, please refer to the SBA's page on loan forgiveness as most of the same principles will apply. In general, the PPP will be forgiven if the funds are spent in the allowable ways, the total is spent, and a forgiveness application is submitted.

Taking a 2nd loan from the PPP

Previous recipients of the PPP may apply again for another loan of up to $2 million if they meet these criteria:

  • Have 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.

Read this blog post to learn more about taking a second draw.

Thinking of applying? Here’s how to get ready.

Before the program re-opens, you can prepare your documentation and read more about the PPP on the SBA’s website. Note that at the time of writing, this has not been updated to reflect changes from the new spending bill.

If you are considering applying for the PPP, here are some things you can do to prepare. 

  • Talk to your accountant to see if the program is right for your business. Consider the terms for loan forgiveness and whether you’ll be able to meet those. Borrowers will likely only be able to take one loan from this round, so consider taking the maximum amount.
  • Reach out to your banker and express your interest in applying for the program. Ensure they’re an SBA-approved lender, get the application, and confirm what documents you’ll need. If they're a community financial institution, check to see if they'll be able to lend in the first two days the program reopens for applications so you can be first in line to receive funding.

You can also get a head start by preparing the documents you’ll need for the application. This includes:

  • PPP application (SBA form 2483)
  • Confirmation of payroll costs. Small businesses use IRS forms 940, 941 (for all 4 quarters), or 944 and quarterly state unemployment tax. Self-employed with no employees use 1040 Schedule C and 1099 MISC.  Self-employed with employees, use 1040 Schedule C form 941 and quarterly state unemployment tax payment records.
  • A payroll statement or similar documentation to prove you were in operation on Feb 15th, 2020
  • Evidence of any employer health or retirement contributions
  • Proof of ownership. For corporations and partnerships, you can use IRS form 1065 from 2019. For sole proprietors and independent contractors, form 1040 Schedule C.
  • Information on each owner with over 20% stake in the business, including names, TINs, a copy of driver’s license or passport, and email addresses.

What to expect next

The SBA will soon release consolidated guidance on loan forgiveness for each round of the PPP. When they do, we'll pass along that info to our clients. We're also working with other community resource partners to host a webinar addressing FAQ around the PPP renewal and the EIDL extension.

In the meantime, send questions to

Examples: calculating max PPP loan amount

Example 1 – No employees make more than $100,000
Annual payroll: $120,000
Average monthly payroll: $10,000
Multiply by 2.5 = $25,000
Maximum loan amount is $25,000

Example 2 – Some employees make more than $100,000
Annual payroll: $1,500,000
Subtract compensation amounts in excess of an annual salary of $100,000:
Average monthly qualifying payroll: $100,000
Multiply by 2.5 = $250,000

Example 3 – No employees make more than $100,000, outstanding EIDL loan of $10,000.
Annual payroll: $120,000
Average monthly payroll: $10,000
Multiply by 2.5 = $25,000
Add EIDL loan of $10,000 = $35,000
Maximum loan amount is $35,000

Example 4 – Some employees make more than $100,000, outstanding EIDL loan
of $10,000
Annual payroll: $1,500,000
Subtract compensation amounts in excess of an annual salary of $100,000:
Average monthly qualifying payroll: $100,000
Multiply by 2.5 = $250,000
Add EIDL loan of $10,000 = $260,000
Maximum loan amount is $260,000


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Still have questions?

If you have more questions about the PPP, we're here to help. Either call us directly at (315) 443-8634 or email us at If needed, we'll refer you to our on-call accountant for a free consultation.

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