12 things to know about the new Paycheck Protection Program

By Sutton Turner, CP Guest Contributor Friday, January 01, 2021

The President has signed the second COVID-19 Relief bill which funds $285B into the Payroll Protection Program (PPP) which was created in April 2020.  At Vanderbloemen  we were able to serve literally hundreds of thousands of churches, Christian schools, non-profits, and values-based businesses through the original PPP process with weekly Facebook Live events, custom templates, and blogs tracking the updates.  Now we’re ready to reboot the process and help more organizations through the second PPP.  Here are some of the things you need to know today.   

Things you need to know about PPP #2

1. First, the climate has changed in the U.S. for churches, Christian schools, and non-profits receiving money from the government to maintain its staffing levels. Our CEO, William Vanderbleomen, does a great job explaining the current events in this article “Stop Criticizing Churches for Taking Government Help in a Pandemic.”  During the original PPP, there was a lot of concern and media challenges for organizations who participated in the program, however, the climate has changed during the last 9 months.

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2. If you received PPP #1 you are eligible to apply for PPP #2 if you meet the requirements which will come out from the Small Business Association in approximately 10 days after the bill is signed into law by the President. If you participated in PPP #1, you are required to have used or will have used all of the loan monies in order to apply for the PPP #2. 

• Employee Count Changes: For PPP #1, the maximum number of employees you could have to be eligible was 500. The new employee limit for PPP #2 is 300 employees per physical location.
• Total loan amount was maxed at $10M for PPP #1. The loan amount for PPP #2 is $2M.
• The new forgiveness period is 8 or 24-weeks.

3. One of the major new items or requirements in PPP #2 that was not in PPP #1 is that organizations are required to have 25% less gross receipts in one quarter of 2020 compared to the same quarter in 2019. For example, if in Q2 of 2020 your church’s total revenue was $750,000 and your church’s total revenue was $1,000,000 in Q2 2019, then you qualify. It appears from the language in the bill that an organization can compare any quarter in 2020 (Q1-Q4) to the comparable quarter in 2019 (Q1-Q4).

• Borrowers who were not in business during the first, second, or third quarter of 2019 (January 1 – September 30), but were in business during the fourth quarter of 2019 (October 1 – December 31), can compare the first, second, or third quarter of 2020 (January 1 – September 30) to the fourth quarter of 2019.

4. Details are still to come on full-time employee equivalent requirements when the cover period will start and end, etc., but one thing is clear: this program is a refunding of the original PPP #1, not the beginning of a totally new program.  So, it’s critical to incorporate what we learned during PPP #1 and apply it to PPP #2. 

5. Churches, non-profits, Christian schools, along with most small businesses are included in PPP #2.

6. PPP loan #2 is calculated based on 2.5 months worth of payroll. That is 2.5 times the average total monthly payment for payroll costs during 2019 or the one-year period before the loan is made.  Businesses that are classified as restaurants can use 3.5 multiplier for payroll costs to create their PPP #2 loan. 

7. Expenses that the PPP #2 loan can be used for has expanded (compared to PPP #1) to include the following: 

• 60% used for payroll and benefits;
• 40% used for mortgage interest or rent payments, utilities, and interest (assumed same as PPP #1);
• Covered operations expenditures: Payment for any software, cloud computing, and other human resources and accounting needs;
• Covered property damage costs: Costs related to property damage due to public disturbances that occurred during 2020 that are not covered by insurance;
• Covered supplier costs: Expenditures to a supplier pursuant to a contract, purchase order, or order for goods in effect prior to taking out the loan that is essential to the recipient’s operations at the time at which the expenditure was made. Supplier costs of perishable goods can be made before or during the life of the loan;
• Covered worker protection expenditure: Personal protective equipment and adaptive investments to help a loan recipient comply with federal health and safety guidelines or any equivalent state and local guidance related to COVID-19 during the period between March 1, 2020, and the end of the national emergency declaration.

8. The Covered Period is the time the loan money is to be used by the borrower of PPP #2 to be eligible for forgiveness. The PPP #2 loan Covered Period is to begin on the date the loan originates. The end date can be 8 weeks or 24 weeks after the loan origination date or any date in between the 8 weeks and 24 weeks. In addition, the Covered Period for PPP #1 loans may now extend to March 31, 2021, instead of December 31, 2020.

9. There is a simplified application process for loans under $150,000.

10. Prior to PPP #2, the expenses used with the PPP #1 loan were not tax-deductible for small business owners. However, PPP #2 clarifies that expenses paid with both PPP #1 and PPP #2 are tax-deductible for business owners. 

11. If you are a small business owner, you can now deduct 100 percent of your business meals that take place at a restaurant for 2021 and 2022.

12. For all nonprofits and churches, the above-the-line charitable contribution is extended through 2021 at $600 for those married filing jointly and $300 for other filers. So currently, these rules apply for 2020, but now these additional above the line charitable deductions are extended through 2021.  

Stay tuned for more clarification as we learn more about this bill.