Paycheck Protection Program
With allocations from the federal government's recent coronavirus relief package, the U.S. Small Business Administration (SBA) has launched a new round of Paycheck Protection Program (PPP) loans with good options for both first-time and second-draw borrowers.
In this round, certain smaller businesses who received a PPP loan to take out a "PPP Second Draw Loan" of up to $2 million. To qualify, you must:
- Employ no more than 300 employees per physical location,
- Have used or will use the full amount of your first PPP loan, and
- Demonstrate at least a 25% reduction in gross receipts for any quarter of 2020 compared to the same quarter in 2019. Alternatively, an entity may compare their annual revenues on their 2020 tax return to their 2019 tax return to show a 25% reduction.
The PPP funds are also eligible to first-time applicants with 500 or fewer employees. Eligible entities include for-profit businesses (including those owned by sole proprietors), certain nonprofit organizations, housing cooperatives, veterans' organizations, tribal businesses, self-employed individuals, independent contractors and small agricultural co-operatives. Most 501(c)(6) organizations are newly eligible with this legislation provided they have 300 or fewer employees and do not receive more than 15% of their gross receipts from lobbying activities.
Recently released guidance has stated that the last day to apply will be March 31, 2021. Applicants will file Form 2483-SD (Paycheck Protection Program Second Draw Borrower Application Form) with their lender.
Here are some additional points to consider:
Loan terms- Borrowers may receive a PPP Second Draw Loan of up to 2.5 times the average monthly payroll costs in the year preceding the loan or the calendar year. However, borrowers in the hospitality or food services industries (NAICS codes beginning with 72) may receive PPP Second Draw Loans of up to 3.5 times average monthly payroll costs. Only a single PPP Second Draw Loan is permitted to an eligible entity.
Simplified application - Borrowers of PPP Second Draw Loans of $150,000 or less may submit a certification, on or before the date the loan forgiveness application is submitted, attesting that the eligible entity meets the applicable revenue loss requirement. Nonprofits and veterans' organizations may use gross receipts to calculate their revenue loss standard. These borrowers will be eligible for a one-page simplified forgiveness application.
Contact ICCU Commercial Loan Manager, Jim McClain at (989)772-6545 to learn more and submit your application.