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PPP2—Have You Applied For Relief?

Red and white closed due to COVID-19 sign hanging in a window.

During the pandemic, keeping small businesses like yours open has not only been your top concern, but also the concern of financial experts, the government, and your customers. 

That’s why the Paycheck Protection Program (PPP) was first developed in 2020 and reopened in January of 2021 as “PPP2.” PPP2 provides forgivable loans to help small businesses keep their workers employed and cover some associated expenses if their business has been affected by COVID-19. 

If you own a small business and want to apply for a first loan draw through PPP2, or find out if you are eligible for a second loan draw, Remote Books Online can help you understand the program and the application requirements. 

What PPP2 Means For Your Small Business 

These five questions and answers can help you decide if a PPP2 forgivable loan will benefit your business. 

  1. What Is The Paycheck Protection Program, And How Does It Help Me?

When it first started last year, PPP made $525 billion in funds available to small businesses through forgivable loans backed by the Small Business Administration. This money helped small businesses keep workers employed and their doors open after COVID-19 hit. PPP’s last loan applications were accepted on August 8, 2020. 

Then, on December 21, 2020, another Relief Bill was passed with an additional $284 billion assigned for funding. PPP2 reopened on January 11, 2021, and is accepting applications until March 31. (There are some differences between PPP and PPP2 that we’ll cover throughout this post.) In less than a month after its reopening, the SBA had already approved almost 1.3 million loans. 

If you operate a small business, PPP2 can help you continue to pay your workers. It may also be used to cover other expenses such as rent, mortgage interest, payroll costs, and group healthcare coverage. This could be essential if COVID-19 has compromised your business income. And, with no fees charged by the lenders or the SBA, and no personal or collateral guarantees required, you won’t face hidden costs or put your business or personal finances at risk when you apply.

  1. Who Is Eligible For PPP2? 

The SBA says you are generally eligible for a PPP2 Loan if you are:

Stressed female owner standing behind sign in door window saying Sorry, close due to COVID-19.

  • A small business
  • An S or C corporation
  • An LLC
  • A private nonprofit
  • A faith-based organization
  • A tribal group
  • A veterans’ group
  • A self-employed individual who files an IRS Schedule C with their Form 1040, such as independent contractors and sole proprietors

You may have no more than 300 employees, although restaurants and hospitality businesses (new for PPP2) may qualify if they have 500 or fewer employees per location. And, you must demonstrate you’ve had at least a 25% reduction of business revenue as a result of COVID-19 between the same quarters in 2019 and 2020 (also new for PPP2). 

Note: If you received a first draw PPP loan last year but will or have already used the full amount for authorized expenses, you can still be eligible for a second draw loan with PPP2.

How Much Can I Borrow? 

Today, you may borrow up to 2.5 times your average monthly payroll costs in the year prior to the loan or calendar year. There are some differences between PPP and PPP2:

  • PPP2 has a maximum loan cap of $2 million while PPP was $10 million
  • With PPP2, hotels and restaurants can get up to 3.5 times their average monthly payroll costs, with a cap of $2 million
  • Again, if you already took out a first draw, you may borrow a second draw with PPP2, but you must first have fully used the initial loan or had the loan forgiven

Also, as mentioned before, unlike PPP, you will need to show that your business revenue decreased by at least 25% when compared to the same quarter in 2020. 

  1. How Do I Apply For A Loan?

You may apply for a loan until March 31. Loans have an interest rate of one percent, and those issued now will mature in five years. Visit the SBA’s Lender Match to find approved lenders and helpful information about how to go through the application process and learn what documentation the lender requires.

You should expect to provide payroll information from 2019, 2020, or the last calendar year.

  • If you apply for more than $150K, more documentation may be required, such as bank statements, tax records, and account reconciliations
  • If you ask for loan forgiveness, you will need to provide this additional information

You should be connected with lenders within two days of filling out the Lender Match form. In the meantime, you can take a look at the application and see what it asks. 

  1. What Is A Forgivable Loan? 

You’ve been reading about forgivable loans and their requirements throughout this blog post and may wonder what they are. PPP and PPP2 give borrowers the opportunity to ask for forgiveness on the loan. That means you essentially could be getting this money for free if you follow the loan requirements. According to the SBA, during the 8-24 week covered period following loan disbursement:

  • You must keep the same number of employees and maintain compensation levels (if you took loans through both PPP and PPP2, your employee and compensation levels must remain the same for PPP2 as what you reported for PPP)
  • You must spend the proceeds on eligible payroll expenses (up to 60% of the loan must be spent on these expenses) 

Of the remaining 40% of the loan, only non-payroll costs (such as rent, mortgage expenses, utilities) will be forgiven. You can apply for forgiveness once the loan proceeds are used and any time up to the loan maturity date. Check with your lender for the documentation needed to apply for forgiveness. 

If Your Small Business Wants To Apply For PPP2 Or Forgiveness, We Can Help

Even without COVID-19, business owners typically have many responsibilities and concerns to fill their time. Bookkeeping may not always be your top focus. If you want to apply for PPP2, but you’re worried your financial information isn’t ready or adequate, especially if you want to ask for loan forgiveness, talk to us. 

At Remote Books Online, we specialize in taking your paperwork and catch-up bookkeeping and getting your financials accurate and up-to-date—so your business can weather the pandemic and you can get back to work.

Let us get your bookkeeping straightened out now so you can apply before PPP2 closes on March 31. We have a range of plans starting at $95 a month, and you can take advantage of one of the best things we do: we can reconcile your first month’s books for free to show you exactly what to expect from us.

Get a quote today to find out more about our services (including Back Bookkeeping, Real-Time Bookkeeping, Payroll, and more) by Certified QuickBooks Pro Advisors and Xero-Certified Advisors. We look forward to helping you become PPP2-Ready.

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