The CARES act authorized the SBA to make loans to qualified businesses under certain circumstances. The Act established the Paycheck Protection Program (PPP1), which provides up to 24 weeks of cash-flow assistance through federally subsidized loans administered by participating financial institutions. PPP1 application period ended August 8, 2020.

The Consolidated Appropriations Act (CCA) creates a second Paycheck Protection Program (PPP2) loan program. PPP2 allows certain small businesses who received PP1 and experienced a 25% reduction in gross receipts per quarter in all or part of 2020 as compared with the same quarter for 2019.

Eligible borrowers must meet the following conditions:

• Company must have less than 300 employees.
• Company must have taken out a PPP1 loan, and use or expect to use for qualified expenses on or before the expected date for PPP2 disbursement.
• The Company must experience a 25% or more reduction in gross receipts per quarter in all or part of 2020 as compared with the same quarter for 2019.

PPP1 provided for a borrowing of 2.5 times the average monthly qualified expenses. The same provisions apply for PPP2, except Company’s with an NAISC prefix code of 72 (accommodation and food services) may request a loan based on 3.5 times average monthly qualified expenses.

Qualified expenses include payroll (limited to $100,000 annual per employee), rents, certain interest payments and utilities for PPP1. PPP2 expands qualified expenses to include covered worker protection and facility modification expenditures, covered property damage costs from public disturbances, and covered operating expenses essential to operating during COVID.

To be eligible for loan forgiveness, Company must spend at least 60% of PPP1 or PPP2 on qualified payroll during the 8- or 24-week coverage period of the loan. Expenses paid with PPP1 and PPP2 are deductible for income taxes.

It is expected the PPP program will re-open the week of January 11, 2021. It is anticipated that small community banks will open first followed by the larger institutions a few days later. It is expected the PPP1 loan will re-open first, followed by PPP2 loans a few days later. The closing date for loan applications is March 31, 2021.