The Small Business
Paycheck Protection Program (PPP)
The Paycheck Protection Program (PPP) application deadline has been extended from March 31 to May 31, 2021.
Based on revised guidance released by the SBA on March 3, 2021, self-employed individuals who file IRS tax Form 1040, Schedule C may calculate their maximum loan amount using GROSS income. Prior to the guidance, the loan amount was based on payroll costs plus net profits. This change is designed to increase the loan amounts for some small business owners. (Please note that borrowers whose PPP loan has already been approved as of the effective date of this guidance cannot increase its PPP loan amount based on the new calculation methodology.) The guidance also removes the eligibility restriction that prevents businesses with owners who have non-financial fraud felony convictions in the last year from obtaining PPP loans, and removes the eligibility restriction that prevents businesses with owners who are delinquent or in default on their Federal student loans from obtaining PPP loans.
At the end of 2020, lawmakers passed the Consolidated Appropriations Act, 2021, with new economic relief measures in response to COVID-19. The new law includes $284.5 billion in added funding for the Paycheck Protection Program.
Along with restarting the PPP, which provides low-interest, forgivable small business loans to eligible borrowers, the legislation updates the program in important ways. Most notably, it now allows certain borrowers to apply for a second PPP loan, in addition to accepting applications from first-time borrowers.
In this second round of PPP funding, known as “PPP2,” borrowers who already received a PPP loan can apply for a second-draw loan up to $2 million (based on the amount of their payroll) if they meet certain requirements (reduced from a limit of $10 million for first-time PPP borrowers).
To be eligible for a second-draw PPP loan, an applicant must meet ALL the following requirements:
PPP2 will also allow new first-time borrowers, including:
The PPP will continue to emphasize each borrower’s payroll expenses. Both the formula to calculate loan amounts (based on average monthly payroll) and loan forgiveness requirements are staying the same. But there are some important updates:
The closing date for PPP Round 2 loan applications has been extended to May 31, 2021.
Important Disclaimer: Bank of the Sierra wants to support our business customers by providing information and reminders about the Paycheck Protection Program (PPP), which are based on guidance from the Small Business Administration (SBA). Please note that the information we provide is for informational purposes only. We are not guaranteeing its accuracy. We are not endorsing the program nor providing business, legal, or tax advice. There are still uncertainties about the program, and the SBA is expected to release additional guidance. Current information can be found on the SBA’s Paycheck Protection Program webpage.