PPP 2021 $284B stimulus package: new funding, new rules, simplified application

In this 4-minute read:

  • $284 billion of new PPP funding for 2021
  • Additional eligible expenses allowed under PPP funding
  • Simplified, 1-page application for loans under $150K
  • New types of PPP eligible businesses
  • “Second draw” PPP loans for hardest-hit businesses that got PPP loans in 2020
  • Can I get the new PPP loan if my previous loan hasn’t been forgiven yet?

The Paycheck Protection Program of the CARES Act of 2020 provided billions of dollars of relief for America’s small businesses, but as the COVID-19 pandemic continues into the new year, Congress has passed a new round of PPP funding and relief for struggling businesses.

Please note: This article is intended for informational purposes only. We have made an effort to be as accurate as possible in this fluid situation, but we cannot be held responsible for any inaccuracies that may occur. This update is not intended to be exhaustive. Please consult a qualified business advisor.

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Key PPP updates for 2021 include:

  • PPP borrowers can set their PPP loan’s covered period to be any length between 8 and 24 weeks to best meet their business needs;
  • PPP loans will cover additional expenses, including operations expenditures, property damage costs, supplier costs, and worker protection expenditures;
  • The Program’s eligibility is expanded to include 501(c)(6)s, housing cooperatives, destination marketing organizations, among other types of organizations;
  • The PPP provides greater flexibility for seasonal employees;
  • Certain existing PPP borrowers can request to modify their First Draw PPP Loan amount; and
  • Certain existing PPP borrowers are now eligible to apply for a Second Draw PPP Loan

The new bill extends the covered period for first-draw PPP loans

The new funding bill extended the covered period to March 31, 2021. This applies to PPP loans made before, on, or after the date of the enactment of the new bill, including the forgiveness of these loans. Note: on March 30, 2021, President Biden signed the PPP Extension Act which extends the application deadline for PPP loans to May 31, 2021.

PPP 2021 adds additional eligible expenses for forgiveness

There have been several updates to the original PPP terms over the past months, and the latest round of PPP funding adds more eligible forgivable expenses, so more small businesses may take advantage of this relief package. 

The new bill makes the following expenses allowable and forgivable Paycheck Protection Program funds:

  • Covered operations expenditures: Payment for any software, cloud computing, and other human resources and accounting needs
  • Covered property damage costs: Costs related to property damage due to public disturbances that occurred during 2020 that are not covered by insurance
  • Covered supplier costs: Expenditures to a supplier pursuant to a contract, purchase order, or order for goods in effect prior to taking out the loan that are essential to the recipient’s operations at the time at which the expenditure was made. Supplier costs of perishable goods can be made before or during the life of the loan
  • Covered worker protection expenditures: Personal protective equipment and adaptive investments to help a loan recipient comply with federal health and safety guidelines or any equivalent State and local guidance related to COVID-19 during the period between March 1, 2020, and the end of the national emergency declaration

The new language also allows loans made under PPP before, on, or after the enactment of this new act to be eligible to utilize the expanded forgivable expenses except for borrowers who have already had their loans forgiven.

The new PPP program will have a flexible covered period and a simplified application process

The new 2021 PPP language allows borrowers to elect a covered period ending at the point of the borrower’s choosing between 8 and 24 weeks after loan origination.

In addition, for loans under $150,000, there will be a simplified, one-page application form created by the SBA and approved by congress. Again, this is still forthcoming, but is likely to be signed into law. This will be a welcome relief to many small businesses that struggled through a complicated PPP loan approval process for the first and second rounds of PPP funding during 2020.

“Second draw” PPP loans for harder-hit businesses that received PPP funding in 2020

If you got a PPP loan in the first round, you can get a “second draw” PPP loan, provided your business does not employ more than 300 employees, has used or will use the full amount of the first PPP, and can demonstrate at least a 25 percent reduction in gross receipts in the first, second, or third quarter of 2020 relative to the same quarter in 2019. 

The new bill provides applicable timelines for businesses that were not in operation in Q1, Q2, Q3, and Q4 of 2019. Applications submitted on or after January 1, 2021 are eligible to utilize the gross receipts from the fourth quarter of 2020.

Eligible entities for these “second draw PPP loans” must be businesses, certain non-profit organizations, housing cooperatives, veterans’ organizations, tribal businesses, self-employed individuals, sole proprietors, independent contractors, and small agricultural co-operatives.

At this point the terms of the second draw PPP loans appear to be similar to what has previously been established, but businesses in industries assigned to NAICS code 72 (Accommodations and Food Services) may receive loans of up to 3.5X average monthly payroll costs. No loan can be greater than $2 million.

If you haven’t received PPP loan forgiveness, you can reapply/modify/increase your PPP loan amount

Previous PPP loan borrowers who returned all or part of their PPP loan may reapply for the maximum amount applicable under the new terms, so long that they have not yet received forgiveness. Additionally, PPP borrowers whose loan calculations have increased due to changes in interim final rules to work with lenders to modify their loan value regardless of whether the loan has been fully disbursed, or if Form 1502 has already been submitted.

New SBA grants and loan eligibility for venues, theaters, museums, etc.

The revised language of the 2021 PPP bill makes several types of businesses eligible for PPP loans, including certain non-profits and news organizations, and allows for SBA grant funding for eligible live venue operators or promoters, theatrical producers, live performing arts organization operators, museum operators, motion picture theatre operators, or talent representatives who demonstrate a 25 percent reduction in revenues.

Repeal of EIDL advance deduction for PPP loan forgiveness, extension of EIDL grant funding

The new bill repeals section 1110(e)(6) of the CARES Act, which required PPP borrowers to deduct the amount of their EIDL advance from their PPP forgiveness amount. In other words, if you got a $10K EIDL grant/advance in 2020, you had to subtract that amount from your PPP loan forgiveness amount. This will no longer apply.

If you already received PPP loan forgiveness and you deducted an EIDL grant from your loan forgiveness amount, the new bill contains language requiring the SBA to issue rules that ensure borrowers are “made whole.” 

The EIDL (Economic Injury Disaster Loan) grant program is also being re-funded and the language extends the covered period for Emergency EIDL grants through December 31, 2021.

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