Facebooktwitterpinterestlinkedinmail

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.

You may also be interested in...

Understanding Organic Growth vs Inorganic Growth

Understanding Organic Growth vs Inorganic Growth

Business growth requires both organic and inorganic growth. Each method carries its own set of advantages, challenges, and implications for the trajectory of a company. Whether you are a startup or established enterprise, understanding the dynamics of organic and...

Management Development Unlocked Podcast

Management Development Unlocked Podcast

This episode of Management Development Unlocked marks the 50th episode! Eric’s guest is Tom Applegarth. Tom’s entire career has been spent in human resources at multiple companies, both big and small. Today, he is the Vice President of Human Resources for Preferred...

Empower Your Business with a Virtual CFO

Empower Your Business with a Virtual CFO

In today's dynamic business landscape, having a strategic financial perspective is more crucial than ever. However, not all businesses can afford to have a full-time Chief Financial Officer (CFO) on their roster. Many choose instead to utilize virtual CFO services – a...

Key Performance Indicators for Financial Success

Key Performance Indicators for Financial Success

Financial Key Performance Indicators (KPIs) are crucial measurements of a company’s fiscal health. These metrics provide a window into the current and projected profitability of an organization, enabling managers and stakeholders to make informed decisions. By...

Inventory Management: Strategies to Boost Profits

Inventory Management: Strategies to Boost Profits

For many businesses, product inventory is their biggest asset. Effectively managing the inflow, storage, and outflow of inventory is critical to the financial success of the company. When inventory management is done right, customers can place orders with confidence,...

Meet Tom Applegarth Outsourced HR Solutions

Meet Tom Applegarth Outsourced HR Solutions

Preferred CFO recently added Human Resources Veteran, Tom Applegarth, to the Preferred CFO team to offer outsourced HR services in addition to or standalone from outsourced CFO services. In this video, Tom introduces his experience and key benefits he offers Preferred...

2023 SaaS CFO Guide

2023 SaaS CFO Guide

A SaaS CFO is a chief financial officer with specific experience in the Software as a Service (SaaS) industry. A SaaS business is different from traditional businesses that require a one-time purchase or otherwise brief relationship transaction as a SaaS company...

Cost Analysis and Price Analysis Explained

Cost Analysis and Price Analysis Explained

Cost analysis and price analysis are two important procedures that are used by businesses to calculate the true cost of a product or service and determine the best sales price. By understanding and correctly utilizing these processes, businesses can make informed...

Facebooktwitterpinterestlinkedinmail