Important PPP update for 2021
On December 22, 2020, Congress passed a bill renewing funding under the CARES Act, including an additional $284 billion earmarked for America’s struggling small businesses. The rules and application process for PPP loans and forgiveness have been modified, with more businesses eligible for PPP loans (INCLUDING 501(C)(6) NON-PROFITS), more expenses forgivable, and a simplified application process. Also there is provision for “second draw” PPP loans for businesses that received PPP funding in 2020.
In this 2-minute read:
- How to calculate PPP loan amounts for non-profits, religious institutions, veterans organizations, and tribal businesses
Just as many businesses across the United States are being impacted by COVID-19, your non-profit or religious organization might have taken a huge financial toll during this economic downturn.
In this article, we’ll help you determine the maximum PPP loan amount you can request as a non-profit, religious institution, veterans organization, or tribal business.
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How to calculate the maximum PPP loan amount allowed for non-profits, tribal businesses, veterans organizations, and religious institutions
Millions of businesses have already put in their requests for the PPP loan, but it’s not too late if you haven’t done this already. Congress has approved a new round of funding, and we expect there will likely be more before the COVID-19 crisis is over, due to the overwhelming demand. But don’t wait to apply. The extended application deadline is May 31, 2021.
Follow the steps outlined here to determine how much you can request for your non-profit organization, veterans organization, tribal business, or religious institution, up to the max of $10 million.
Step 1: Total your 2019 or 2020 payroll expenses
Gather the documentation outlined below and total up your 2019 or 2020 payroll expenses.
Compute 2019 or 2020 payroll costs by adding the following:
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- 2019 or 2020 gross wages and tips paid to your employees whose principal place of residence is in the United States, which can be computed using 2019 IRS Form 941 Taxable Medicare wages & tips (line 5c-column 1) from each quarter plus any pre-tax employee contributions for health insurance or other fringe benefits excluded from Taxable Medicare wages & tips, subtracting any amounts paid to any individual employee in excess of $100,000 and any amounts paid to any employee whose principal place of residence is outside the U.S;
- 2019 or 2020 employer health insurance contributions;
- 2019 or 2020 employer retirement contributions and
- 2019 or 2020 employer state and local taxes assessed on employee compensation, primarily state unemployment insurance tax (from state quarterly wage reporting forms).
Please note: The entity’s 2019 or 2020 IRS Form 941 and state quarterly wage unemployment insurance tax reporting form from each quarter (or equivalent payroll processor records or IRS Wage and Tax Statements), along with documentation of any retirement and health insurance contributions, must be provided to substantiate the applied-for PPP loan amount. A payroll statement or similar documentation from the pay period that covered February 15, 2020 must be provided to establish you were in operation and had employees on that date.
Step 2: Calculate your average monthly payroll costs
Total the amount from Step 1 and divide it by 12 to get your average monthly payroll costs for 2019 or 2020.
Step 3: Multiply the average by 2.5
Take your monthly average payroll costs and multiply that number by 2.5.
Step 5: Add any outstanding EIDL loans
If you applied for an Economic Injury Disaster Loan (EIDL) from January 1, 2020 to April 3, 2020, you can include any outstanding loan amount in your PPP loan request.
Do not include any portion of an EIDL COVID-19 loan that you have received as an “advance,” as those funds do not need to be repaid.
Here’s an example of what that calculation might look like for a non-profit, religious organization, tribal business, or veterans organization that took out an EIDL loan:
Annual payroll expenses: $600,000
Average monthly payroll expenses: $50,000
Multiply by 2.5: $125,000
Add outstanding EIDL loan amount of $10,000
Total PPP amount to request: $135,000
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