Payroll Protection Program – Round 2

New Coronavirus Government Loans to Maintain, Restore or Expand Your Workforce

NOTE: From Journal of Accountancy: “A bill to move the Paycheck Protection Program (PPP) application deadline from March 31 to May 31 (2021) won approval in the U.S. Senate…the votes send the legislation to President Joe Biden for his signature several days before the PPP was set to expire (on March 31, 2021)…

“The AICPA praised the passage of the PPP Extension Act, which extends the filing deadline for PPP applications by 60 days and provides an additional 30 days for the SBA to finish processing applications received by May 31.”

Early indications are that the funding for these loans – even as extended – will be grossly inadequate for the degree of financial dislocation that many small and midsize businesses in the United States are suffering. If you find this applies to your business – or your client’s business – click the link below to use our online screening tool to see if you may be eligible for one of several federal and state tax incentives that can boost your cash flow without needing to be repaid – and can often do so faster than this often cumbersome federal loan process.

For other solutions to business cash flow needs, visit EmergencyBusinessRelief


The Emergency COVID Relief Act of 2020 (the Act), which was subsequently attached to the Consolidated Appropriations Act, 2021 and approved on December 21, 2020, included an additional $284 billion for a second round of forgivable loans to U.S. small businesses available over an extended period (through 3/31/2021) and substantial enhancements that include:

  • Expanded eligibility for loan and loan forgiveness,
  • Second PPP loans for especially hard-hit businesses,
  • Deductibility of expenses paid with forgivable PPP loans,
  • Exclusion from taxable income of PPP loan proceeds, and
  • Eligibility for both PPP loans and expanded Employee Retention Tax Credits (ERTC)..

In addition to these expanded benefits for loans issued after 12/31/2020 through 6/30/2021, the new bill includes several benefits for those receiving PPP loan during 2020.that include the following:

  • Increase in eligible expenses for loan forgiveness (e.g., COVID-related protection, some supplier costs, etc.)
  • Tax deductibility of expenses paid with PPP loan proceeds, and
  • New eligibility for Employee Retention Tax Credits (can’t deduct payroll costs paid with PPP funds).

This extended and expanded stimulus program includes the following key components and requirements for new PPP loans to be issued for calendar quarters from 1/1/21 to 6/30/21::

  • Applies to all businesses with up to 300 employees (reduced from previous 500) and paying salaries & payroll tax on 2/15/20;
  • Simplified loan process – talk to your company’s current bank or credit union;
  • Requires 25% or more reduction in gross receipts for any quarter compared with comparable 2019 quarter (replaces prior good faith attestation that uncertainty of current economic conditions made the loan request necessary to support ongoing operations);…
  • No collateral or personal guarantees;
  • 100% government guarantee effectively waives required ability-to-repay requirement;
  • Loan amount maximum is lesser of:
    • Prior year average monthly payroll times 2.5 (3.5 for accommodation and food services sector businesses) their average monthly payroll costs in 2019 or the 12 months before the loan application, health and retirement benefits, rent, utilities and interest on debt obligations (including mortgages), or
    • $2M (reduced from $10M in first round)
  • $25B set aside for small businesses with ten or fewer employees as 2/15/20, and
  • Employers who receive Paycheck Protection Program loans can now qualify for the Employee Retention Tax Credit (ERTC) with respect to wages that are not paid for with forgiven PPP proceeds (this was not permitted under the prior CARES Act provisions).

This loan forgiveness component makes these business loans especially attractive amid the current economic uncertainty. However, the amount forgiven is limited to eight weeks of payroll costs (vs. a total of ten weeks of eligible payroll costs in loan), plus other eligible costs.

Therefore, it’s best viewed as a grant within a larger loan, with 80%+ eligible for forgiveness. However, total loan amount can be forgiven if first 8 weeks of post-loan payroll exceeds pre-loan average payroll up to loan amount (incentive to expand, and not just restore or maintain, workforce).

Some caveats continue to apply, of course, including the following…

  • Non-U.S. resident employees are excluded;
  • Eligible payroll costs are capped at $100,000 (excludes salary/wages over $100,000/year);
  • Interest is not forgiven; and
  • Businesses should confirm existing debt doesn’t preclude or limit taking on additional debt.

It’s important for businesses applying for these loans to do some quick cash flow planning to determine:

  • How loan proceeds will be used – they must be used for payroll & other eligible costs (including insurance), but precisely how & whether salary reductions are necessary should be considered;
  • Whether furloughed or laid off employees are available for rehire (without penalty for loan and loan forgiveness purposes – meaning they’ll still qualify for loan forgiveness purposes);
  • Loan repayment capability – with and without forgiveness – given current debt requirements (note that payments and interest on current SBA loans are deferred for 6 months);
  • Potential cash flow gaps and ways to remediate them; and – beyond cash flow…
  • How underutilized employees can add more customer value to accelerate return to normal business operations and increase customer loyalty and retention.

For more on the new PPP loan details, see this article at The Journal of Accountancy.

For other solutions to business cash flow needs, visit here for EmergencyBusinessRelief.