Enacted at the end of 2020, the Consolidated Appropriations Act, 2021, allocates $325 billion to small businesses, nonprofits and venues hit hard by the COVID-19 pandemic. Of that amount, approximately $284 billion goes toward the Paycheck Protection Program. The previous round of PPP funding ended earlier in 2020.
The rules are complex, but here's an overview of the key PPP provisions:
First-draw and second-draw loans
The new PPP is open to both first-time and second-time borrowers.
Eligible first-draw borrowers include businesses with 500 or fewer employees, sole proprietors, independent contractors and self-employed individuals.
Eligible second-draw borrowers must:
The maximum loan amount for each PPP borrower is $2 million, decreasing from $10 million in the previous round.
Loan usage time frame
PPP borrowers must use their loan within eight weeks or 24 weeks, in order to have their loan forgiven. They must choose one or the other.
Eligible PPP expenses
As before, borrowers must allocate at least 60% of their PPP loan toward payroll costs. The new PPP adds the following eligible non-payroll expenses:
Borrowers can also include additional group insurance in their payroll cost calculation — such as for life, dental, vision and disability insurance coverage.
Unlike before, borrowers who are in Chapter 11 bankruptcy may now qualify for PPP loans.
Underserved, veteran and minority-owned businesses
There are special provisions for underserved, veteran and minority-owned businesses — including those with 10 or fewer employees and those located in low-to-moderate-income neighborhoods. Additionally, the Small Business Administration says that it will take steps to make it easier for these businesses to obtain PPP access.
More PPP provisions
Notably, the act reopens the Economic Injury Disaster Loan advance/grant program plus provides grants to shuttered businesses in the arts and culture sector, such as live venues, theaters and museums.
The PPP opened to new borrowers on Jan. 11, 2021, and to second-draw borrowers on Jan. 13, 2021. However, not all lending institutions are able to roll it out at the same time; contact your institution for details, and let us know if you have any questions.
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