What Is PPP?
Congressional leaders passed a $900 billion fiscal stimulus package to deliver aid to Americans struggling with Covid. Within this bill included $284 billion in new forgivable government loans designed to keep Americans employed during a depressed pandemic economy. This Paycheck Protection loan program or PPP provides small businesses with loans with a limit of up to $2 million per business that can be forgiven if used properly on payroll & business expenses.
- Small businesses can find the maximum possible amount of the loan by taking the average payroll per month in 2019 and multiplying it by 2.5.
- Restaurants and food businesses are able to obtain a larger 3.5 times average monthly payroll.
Who Can Claim PPP?
Small businesses that certify that they had a revenue loss of at least 25% as compared to the corresponding quarter in 2019 qualify for the PPP loan.
For example: Compare quarterly revenue in 2020 against the same quarter of revenue in 2019.
In order to qualify for the second draw – the borrower must show there was at least a 25% decline in revenue from one of the quarters when compared to the corresponding quarter in a prior year. If you are a new startup to where you had little to no revenue in a corresponding quarter due to it being a new business – reach out to your banker and see if you still may qualify.
When Can I Claim PPP?
PPP funding will distribute to banks with first draw loans for new borrowers offered on January 11th, second draw loans opening on January 13th and then all remaining local banks after that. Be sure to reach out to your current banker and make sure they know you are interested in applying, and ensure they will have the resources to process your loan in time when it becomes available.
Where Can I Apply For PPP?
PPP Applications will be done through your individual banks – Talk to your business relationship banker that you use and they should be able to help walk through the steps. If at all possible – try your local banks before using online methods like PayPal or Kabbage.com to have a higher chance of getting your application in. For all current clients of Booked Financial LLC – updated books separating quarterly revenues will be sent via email to make sure you have it ready for your bankers.
Why Should I Apply For PPP?
This is a forgivable loan program – if you were affected by the pandemic and are able to demonstrate the revenue decrease between quarters this is a great opportunity to receive money to cover payroll costs and cover short term liquidity shortfalls. If applied for and completed correctly – this loan is forgivable, and could provide much needed liquidity to any small business who qualifies.
How Can I Apply?
Apply through the bank that you already use – If it is anything like the first round, the money will go quickly – make sure you talk to your banker and get your application in as soon as you can. If you need help getting your financials together for the application, contact one of our reps and we can help get your bookkeeping sorted.
Additional Info
From a tax perspective, guidance on the PPP loans from the first and second PPP rounds clarified that expenses paid using PPP Funds from first and now second rounds will be deductible on your tax return. This announcement is a huge benefit for qualified small businesses as they are able to have their cake and eat it too. If you think you might qualify, go ahead and apply.
Forgiveness of the loan requires that businesses use the loan for payroll and business expenses – 60% of the loan amount must be used for payroll while the remaining 40% can be used for other expenses such as rent & utilities.
Loans less than $150k will get a simplified forgiveness process with a separate form that should be easier to fill out than the first round’s form and your accountant or relationship banker should be able to help you get this process done. If you need help with getting your financials/payroll reports ready to apply for PPP – reach out to your Booked Financial rep for assistance
Summary
- PPP is a government loan that does not need to be repaid if used on payroll or rent/utilities/certain types of interest in a 60/40 proportion
- You can qualify if you show at least a 25% revenue decrease between quarters comparing 2019 and 2020
- Max amounts that businesses can receive are 2.5 times average payroll in 2019 with restaurants and food related businesses able to receive 3.5 times average 2019 payroll both up to $2 million
- Apply through the bank that you already have a relationship with
- Get your application in as soon as you can – money from the first round ran out relatively quick
- Make sure you submit the forgiveness application in a timely manner once that info is released
For more information – get booked for a call with your Booked Financial Rep
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