*This article was updated Jan. 23, 2021 to include information provided under the simplified loan forgiveness application and subsequent IFRs.
If you have a Paycheck Protection Program (PPP) loan and have not yet applied for forgiveness, you may want to wait. The Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (what we’re calling “PPP 2.0”) added some additional categories of expenses for which loan recipients may use their PPP loan proceeds and receive forgiveness, which in some cases, could increase their maximum borrowing and forgiveness limits. New eligible expense items under these new rules include:
Cloud-computing or work-from-home expenditures.
Property damage caused by civil unrest in 2020 that was not covered by insurance.
Certain supplier costs for perishable or other goods purchased under a written agreement.
Worker protection expenses, including PPE.
Certain additional employee group benefit premium payments.
Further, the simplified forgiveness application will now apply to loans under $150,000. If you are impacted by one of these items, it may be worth waiting until the new forgiveness applications are released by the Small Business Administration (SBA). The new application has since been released and is further described under SBA Part Thirty-Three.
These changes are retroactive to borrowers who have not yet applied for and received forgiveness. In addition, new provisions have been added to increase your borrowings if these new rules allow you to. In this case, procrastination may be your friend.
PPP 2.0 also allows for a second draw loan if your business has less than 300 employees (including affiliates) and you can demonstrate a 25% or greater reduction in gross receipts in any 2020 calendar quarter compared to the same quarter in 2019. Pursuant to the PPP Second Draw Application Form, gross receipts for for-profit entities are defined as “all revenue in whatever form received or accrued [. . .] from whatever source, including the sales of products or services, interest, dividends, rents, royalties, fees, or commissions reduced by returns or allowances” and for non-profit entities gross receipts are deemed as having same meaning as set forth under Section 6033 of the Internal Revenue Code.
For further information, please contact any member of Taft’s SBA Task Force and stay tuned as further guidance by the SBA and US Treasury is issued.
Please visit our COVID-19 Toolkit for all of Taft’s updates on the coronavirus.