The Small Business Administration has completed the rules for the second round of Paycheck Protection Program Loans. Applications for the loans must be submitted by March 31.
To qualify, borrowers:
1. Must have received a first loan under the CARES Act in 2020
2. Must have used the 2020 loan proceeds or will use the proceeds before the disbursement of the new 2021 loan is made
3. Must have fewer than 300 employees
4. Must have experienced at least a 25% reduction in gross receipts in 2020. The reduction is measured by a single quarter of 2020 compared to the corresponding quarter in 2019 and
5. May apply for 2.5 months of payroll costs up to $2 million, calculated the same way the first loan was documented. To measure payroll costs, businesses may use as a base period 12 months prior to the loan or may opt instead to use 2019 payroll as a measure. Generally, lenders will already have some documentation from 2019. New documents would not be required.
Self-employed or passthrough corporations are eligible for second loans if they received a first loan. Their eligibility will be governed by their Schedule C income. Businesses eligible for these loans should review the SBA website. For such entities that did not receive their first loan, checking with their lender is recommended, as SBA changed the eligibility for self-employed and passthrough taxpayers mid-year in 2020.
Congress has specified special rules for several industries, that are now eligible for first loans under the affiliate rule and farms and ranches. Businesses should check with their lender on those details.