The bank doors open Monday for the next round of borrowing under the Paycheck Protection Program, with borrowers from the first round eligible to go in for another round of low-interest loans that can be forgiven under certain circumstances.
The Small Business Administration announced Friday that it would start taking applications for new borrowers and “certain” existing borrowers. But the restricted nature of the first days is not expected to last long; the SBA said the PPP will open “to all participating lenders shortly thereafter.”
PPP round 2 will end on March 31. The first round was extended once but the response to it in that added period was minimal, leading to the change in this round that allows a first-round borrower to obtain more money.
While there were thousands of trucking companies and independent owner-operators who received money in the first PPP round, there were always questions among some independent owners whether they would qualify. In the trucking categories divided up by NAICS codes, there was a long list of companies that received money in the first round that listed just one employee.
But in a document released by the SBA concurrent with the release of PPP 2, much of it was verbatim from what was published in the first round. The regulations for self-employed persons make it clear that a loan to an independent contractor is doable under PPP. In the Q&A section, a question is posed: “I’m self-employed and file a form 1040, schedule C. Am I eligible for a PPP loan?”
The answer is yes, if certain conditions are met: You needed to be in operation Feb. 14, you have self-employment income and you’re going to file that section C this year. You also can’t be in a partnership if the partner is filing as well.
Congress authorized $284 billion in additional PPP lending. It is part of a broader package of $325 billion that included more money under the Economic Injury Disaster Loans program.
The first round and its extension closed in August with about $130 billion untapped. But that round did not permit borrowers to come in for a second round. However, getting money a second time is limited to companies with no more than 300 employees. The limit in the first round was 500.
Forgiveness for borrowers of $150,000 or less has been simplified and mostly involves borrower attestation to several key rules in a one-sheet form that has not been released yet.
The Journal of Accountancy defined the eligible amount to be borrowed as an amount of up to 2.5 times average monthly payroll costs, though employee costs more than $100,000 are capped. The years for the basis are 2019 and 2020. (There are higher limits for businesses particularly hit hard by the pandemic, like hotels and restaurants.)
The new round of PPP borrowing for businesses includes a requirement that a borrower be able to show a 25% quarterly drop in revenue, year on year from 2019, to be eligible. Given the strength of the freight market, it has been noted that proving that might be difficult for some trucking companies.
There are several other provisions in the new round that differ from the first round. The covered period of expenses can be any length chosen by the borrower between eight and 24 weeks. There are a greater number of expenses covered. Many types of business that weren’t allowed to get money in the first round now can, including media companies and 501C organizations. Financial institutions that participate in the program will have to answer other questions.