With the COVID vaccine rollout, hope is now on the horizon for many event pros still recovering from the turmoil. However, instead of waiting for the tide to roll in again, some are counting on a second draw PPP loan to get them through until then. Should you be applying for one as well? Let me give you the details so you can decide for yourself.
Who qualifies for a second draw PPP loan?
The newly released Paycheck Protection Program (PPP) funds are open to first-time borrowers with 500 employees or less and existing borrowers with 300 employees or less. Sole proprietors, independent contractors, self-employed, and seasonal employers all can qualify for this second round of PPP loans by applying between January 11 and March 31, 2021. If you are a first-timer, you must have been in business before February 15, 2020, to qualify.
If you took a first draw PPP loan, then you must have used (or plan to use) the full amount of your initial loan for eligible expenses to be eligible for a second draw. You must also show a 25% reduction in revenue between any quarter in 2020 compared to that same quarter in 2019.
How do I show a 25% reduction in revenue?
The most straightforward way you’ll be able to show a reduction in revenue is by providing totals from your gross receipts from any quarter in 2020 compared to that same quarter in 2019. Those receipts should show at least a 25% loss. If it’s easier for you, showing the loss by comparing your annual gross from 2020 to your annual gross in 2019 is also acceptable.
Additionally, if you hadn’t opened up shop in 2019, you can use your gross receipts during the last three quarters of 2020 to demonstrate a 25% revenue reduction when compared to the first quarter of 2020.
Can I qualify if I was denied the first time?
Event pros who were denied for the first draw PPP loan are welcome to apply again. If you don’t know why you were denied the first time, make sure you look into that first. If the denial was due to a specific rule that applied only to the bank or lender you were using, then you should try with a different lender this time around.
What’s the application process like?
Similar to when applying for the first draw PPP loan, the form may look a little different depending upon the lender you choose. Generally, the application is only a few pages in length. On it, you will be asked yes/no questions about your business. You’ll also need to initial good faith statements about how you will use the funds. Certain lenders may require additional paperwork to process the loan. You’ll submit your form directly to the federally-insured participating lender you choose.
If you took a first draw PPP loan, you can apply for a second draw through the same institution, but you can also choose a new lender. PPP lenders include traditional banks like Chase and Bank of America as well as financial technology such as PayPal and Intuit.
Will I qualify for loan forgiveness?
You will qualify for full loan forgiveness if, during the 8-week to the 24-week covered period following loan disbursement, all of these criteria were met:
- Employee and compensation levels are maintained
- The loan proceeds are spent on payroll costs and other eligible expenses
- At least 60 percent of the proceeds are spent on payroll costs.
If you borrow less than $150,000, you can apply for forgiveness with a one-page attestation. If you didn’t supply revenue reduction documentation when you applied for your loan, you will have to supply those documents when applying for forgiveness. All forgiveness documents will be submitted to the lender.
How can I use PPP funds?
PPP funds from the second draw loan can be used for any of these expenses:
- Payroll
- Accounting and human resource needs
- Software, cloud computing, and other operations expenditures
- Employee benefits like group health insurance
- Mortgage interest, rent, and utilities
- Worker protection costs related to COVID-19
- Uninsured property damage costs caused by looting or vandalism during 2020
- Personal Protection Equipment (PPE) or property improvements to become or remain COVID-compliant after March 1, 2020
How much can I borrow?
For most event pros, the maximum amount you’ll be able to borrow is 2.5 times your average monthly payroll costs in 2019 or 2020 with a max of $2 million. If your business is in the Accommodation and Food Services sector, then you’ll be able to borrow 3.5 times your average monthly payroll costs in 2019 or 2020 with a max of $3 million.
To help small businesses, at least $25 billion is being set aside for those with a maximum of 10 employees. Preference will also be given to loans of $250,000 or less to business owners in low- or moderate-income neighborhoods.
What other relief is available for small business owners?
Other than PPP loans, the Small Business Administration (SBA) has several funding options available to small business owners:
Do you have more questions about the second draw PPP loan? Don’t be afraid to contact a CPA you trust or your local lender for answers to your specific business questions.
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