US Paycheck Protection Program 2021 – All you need to know!

 

US Paycheck Protection Program 2021 – Round 2

Here’s all what you need to know!

On December 21, 2020, the US Congress passed a new and additional Paycheck Protection Program (PPP) relief package – PPP-2 – for US$ 900 Billion for aiding Small businesses and individuals impacted by Covid-19 and who couldn’t apply during round 1 of the PPP or still continue to have a business that’s impacted by the pandemic.  Thus, PPP-2 loans will be made available to both first-time qualified borrowers as well as to those borrowers who previously received a PPP loan earlier in 2020. 

So let’s understand briefly all what you need to know:

-       You are eligible to apply for your first PPP loan in 2021 even if you didn’t apply for it in 2020 earlier.

-       Even if you received a PPP loan in 2020, you are eligible to apply a second time provided certain criteria check out.

-       Finally, whether it’s your first or second PPP loan, these loans will have the same terms as the original PPP loan program, which means, like the first PPP loan, the second round of PPP loans will also be fully forgivable if you follow the forgiveness guidelines. At least 60% of the loan must be spent on payroll and the rest spent on other eligible expenses and if the loan is not forgiven, these loans would have an interest rate of 1% and a term of five years. Loan payments are deferred for 10 months after the covered period ends or when you receive a forgiveness verdict, whichever comes first.

Eligibility criteria for PPP-2?

-       First timer for PPP loans?

If any of the following apply to your business, you are eligible:

1.     Your business was operational prior to February 15, 2020.

2.     Your business is still open and operational.

3.     You have no more than 500 employees.

4.     If your business has multiple locations, you have no more than 500 employees per location

5.     Second draw PPP loans

6.     If the following statements apply to your business, you are eligible to apply for your second PPP loan in 2021.

-       Second timer for PPP loans? (Means you have already received PPP loan earlier and consumed it)

1.     Your business was operational prior to February 15, 2020

2.     Your business is still open and operational

3.     You have no more than 300 employees

4.     If your business has multiple locations, you have no more than 300 employees per location

5.     You can show a 25% or greater reduction in gross revenue

6.     Two ways to demonstrate this revenue reduction:

a)    Comparing your annual gross revenue as reported on your tax return between 2020 and 2019.

b)    Comparing your gross revenue in any quarter in 2020 with your gross revenue in the same quarter of 2019.

Derive your PPP-2 loan amount eligibility

The loan amount will be computed in the similar fashion as done in case of the original PPP loan computations.  Your business could receive loan equal to 2.5 times your average monthly payroll costs by using of the following alternatives:

-       Average payroll the one year period before the loan application i.e.

1.     For the calendar year of 2020 or

2.     For the calendar year of 2019

However, there are some exceptions to the loan amount calculation for certain businesses like the Food and Accommodation businesses, they are eligible to 3.5 times the average monthly payroll as computed/opted out of the above two period options.  On the other hand seasonal businesses are eligible for loan only in case they operate only up to 7 months in any calendar year and their gross receipts for the second half of 2020 was 33.33% of gross receipts for the first half of 2020 and will be eligible for loan amount equal to 2.5 times the average payroll costs.

In case of Sole proprietors and independent contractors without payroll, the proprietors and independent contractors are eligible for loans equal to 2.5 times their average monthly net income from 2019 or 2020.

In case of Partnerships, they are eligible for 2.5 times their average monthly distributions. Their average monthly distributions is calculated by taking their distributions from their 2019 or 2020 and multiplying it by 0.9235, then dividing by 12.

Definition of eligible expenses expanded under PPP-2

The first rollout of PPP loans in 2020, the eligible expenses only included payroll costs, rent, and utilities expenses, whereas the second stimulus bill has expanded on the eligible expenses you can use your PPP loan for. These new expenses include:

1.     Operations expenditures: Any software, cloud computing, or other human resources and accounting needs (like Outsourced accountant GJM & Co.).

2.     Property damage costs: Any costs from damages due to public disturbances occurring in 2020 and not covered by insurance.

3.     Supplier costs: Any purchase order or order of goods made prior to receiving a PPP loan essential to operations.

4.     Worker protection expenditures: Any personal protection equipment or property improvements to remain COVID compliant from March 1, 2020 onwards.

These new eligible expenses now apply to all PPP loans, including those obtained prior to August 8, 2020.

Enhancement to your previous PPP loan amount

A request for an increase in your previous PPP loan amount will be made available to some borrowers. It will be open to businesses that did not take the full loan amount or returned a portion of their first loan—so long as they haven’t already applied for forgiveness.  This will allow businesses to receive the difference between their original loan offer and what they ended up taking.

We trust this article was helpful to you in understanding in brief all about PPP-2.  Should you have any queries or need consultation with your application, Schedule a Call today or write to us at info@gjmco.in.

Thanks & Best regards,

Knowledge Base team

GJM & Co.

Chartered Accountants

www.gjmco.in

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