On December 27, 2020, President Trump signed the Consolidated Appropriations Act (the “Act”) into law which, among other things, renews and updates the Paycheck Protection Program (the “PPP”). The PPP was established under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and provided forgivable loans for small businesses in order to incentivize them to keep their employees on the payroll. The Act has made some affirmations and updates to the PPP.
All first time PPP borrowers are subject to the rules and restrictions under the CARES Act. This means that businesses that were not opened by February 15, 2020 are not eligible for future PPP proceeds. However, businesses who already received a PPP loan may be eligible for a second loan. This second loan will have a cap of $2 million, and businesses requesting a second loan must have fewer than 300 employees plus must have experienced a reduction of 25% in gross receipts from one calendar quarter in 2019 compared to the same calendar quarter in 2020, in addition to meeting other requirements. The Small Business Administration rules still apply to any business taking a loan under this program.
Further, borrowers under the original PPP will be able to take tax deductions for expenses paid with PPP loan proceeds. The Act also expanded the list of expenses that are eligible for forgiveness to include business software and/or cloud computing services that are used for business operations. Additionally, forgiveness applications for PPP borrowers who received loans of $150,000 or less will have a simple one-page application.
As always, the Business Group at Stock and Leader can help business owners navigate funding sources along with any other legal needs.