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paycheck protection program

What You Need to Know About PPP Round Two

President Trump signed the Relief Act into law.

The new act reopened the popular Paycheck Protection Program (PPP) by allocating an additional $285 billion for the program. Small businesses that obtained an initial PPP loan can qualify for a second round of loans. More flexible rules have been added to provide for forgiveness of the loans, including clear guidelines that forgiveness of a PPP loan is not taxable.

However, eligibility for a second PPP loan is stricter than before. A borrower will have to have fewer than 300 employees, and be able to establish, in general, that they experienced a 25% drop in gross receipts during the first, second, or third quarter in 2020 relative to that same quarter in 2019. The new act caps PPP loans at $2 million. The act also sets aside $12 billion specifically for minority-owned businesses.

Below are some of the highlights as it pertains to round 2 of the PPP (Paycheck Protection Program)

  • Funds are available to both first time Borrowers and Borrowers who previously received a PPP Loan during the first wave (earlier in 2020)
  • Funds will be available through March 31, 2021
  • Maximum loan cannot exceed $2 million
  • Borrower must have 300 or fewer employees
  • Borrower must have used (or will use) all proceeds from first PPP Loan
  • Borrower had a 25% or greater reduction of “gross-receipts” for any quarter in 2020 as compared to the same quarter in 2019
  • Loan is based on 2.5 times average monthly payroll costs in 1-year period prior to loan or calendar year 2019
    • For Borrowers with NAICS codes starting with 72 (i.e. hotels and restaurants), the loan is based on 3.5 times average monthly payroll costs
  • Eligible spending of loan proceeds is 60% payroll costs (compensation, health, retirement and state and local payroll taxes) and 40% on other eligible covered costs over a covered period of either 8 or 24 weeks
  • Borrowers that returned previous PPP funds during the first round of Loans are eligible to apply for additional PPP funding. SBA to provide guidance within 17 days of enactment of this Bill.
  • The application for additional PPP funding includes a Borrower that is eligible for a loan increase due to a favorable change in an SBA rule as compared to when the loan was previously obtained
  • Expansion of Covered (i.e. eligible) Costs:
    • During the first wave of PPP Loans as directed by the CARES Act, eligible expenses were defined as Payroll Costs (e.g. salary, health insurance, unemployment insurance), Interest Expense, Rents, Utilities (water, sewer, gas and electricity distribution, communication phone and internet), transportation (fuel). The COVID Relief Bill added the following covered expense items:
      • Covered Operations Expenditures – costs to facilitate business operations e.g. payroll processing, human resources, sales and billing, accounting for supplies and/or inventory, cloud computing, business software
      • Covered Property Damage Costs – costs incurred relating to property damage from public disturbances occurring during 2020 that is not covered by insurance
      • Covered Supplier Costs – expenditure paid to a supplier pursuant to a contract order or purchase order that is essential to operations
      • Covered Worker Protection Expenditures – costs incurred to facilitate adaptation of business operations to comply with COVID-19 federal, state or local health and safety guidelines
      • Additional Payroll Costs – vision and dental insurance, group life and disability insurance
    • Streamlined Forgiveness Protocol for PPP Loans that are not in excess of $150K
      • SBA to create a one-page loan forgiveness certification form for expedited processing that requires eligible borrowers to:
        • Provide a description of the number of employees the Borrower was able to retain because of the PPP loan
        • Provide an estimated amount of loan spent by the Borrower on payroll costs
        • Provide the amount of the total PPP loan
        • Retain employment records for 4 years following submission Retain other records for a 3-year period

Cosmo Insurance Agency is a full-service independent insurance agency based in Hackensack (Bergen County) and Lakewood (Ocean County), New Jersey that offers an all-encompassing range of insurance options for both individuals and businesses. Cosmo keeps its promise to assure an efficient and creative approach to the services we offer. Each of our clients experience a personalized and long-term relationship with us. Our New Jersey based team of health brokers guides our clients in helping them choose the most cost-effective options. By incorporating our knowledge of the insurance guidelines for healthcare, employee benefits, life insurance, self-insurance, dental, disability, and long term care insurance, we keep our clients up-to-date with affordable plans that cover all their specific insurance needs.

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2024