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On Sunday, December 20, Congress passed a $900B stimulus package. One week later, on Sunday, December 27, Trump signed the bill into law. While there are many aspects of the bill offering moratoriums on evictions and extending unemployment benefits, the bill also provides a lifeline to small businesses.

One important aspect of this bill is that PPP expenses will be tax deductible. In addition to this change, any business with a decrease in gross receipts of 25% in any calendar quarter from 2019-2020 will qualify for a second round of PPP funding, which is being called the “PPP Second Draw.”

Of the $900B package, over $284 billion is set aside for forgivable PPP loans (see the breakdown here). Here are the guidelines:

  1. To be eligible, you must demonstrate that your gross receipts in any quarter of 2020 are down at least 25% compared to the same quarter in 2019.  We need clarification on the SBA on this, but the current opinion is this will be cash deposits, and not accrual base revenue.
  2. Generally, borrowers may receive a loan amount of up to 2.5X the average monthly payroll costs for 2019 or the prior rolling 12 month period, up to a maximum of $2M. Hard-hit industries in the food and hospitality industries can receive 3.5 x their payroll.
  3. To be eligible, you must not employ more than 300 people and have used the full amount of your first PPP loan, or have plans to use the full amount.
  4. Eligible entities include: businesses, specific non-profit organizations, housing co-operatives, veterans’ organizations, tribal enterprises, self-employed individuals, sole proprietors, independent contractors, and small agricultural co-operatives.
  5. Forgivable expenses will equal the sum of your payroll costs, as well as covered mortgage, rent, and utility payments, covered operations expenditures, covered property damage costs, covered supplier costs, and covered worker protection expenditures incurred during the covered period.  If you have not filed for forgiveness on your first PPP loan, you may now include the additional costs to cover property damage related to rioting, personal protection equipment, or any expense that was a result of the new requirements of dealing with COVID – i.e. Plastic barriers between employees and customers.
  6. The same 60/40 allocation between payroll and non-payroll costs that applied to initial PPP loans will apply.

In addition to the second round of PPP funding, there was also $15 billion in funds set aside for grants for the transportation and entertainment industry. They will require the same 25% gross receipts decline test, but they are capped at a $10 million instead of $2 million. You cannot take advantage of both the PPP round 2 and the grant. You must choose one or the other. 

Would you like help navigating PPP or do you have other financial strategy-related questions? Contact us to speak with a CFO today.

About the Author

Jill Tavey CFO at Preferred CFO

Jill Tavey

CFO

Jill Tavey is an experienced outsourced CFO with over a decade of high-level financial expertise and experience. Her ability to negotiate, make and maintain key relationships, and shape strategic direction has helped propel multiple companies through significant growth.

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