Navigate the changes in the new paycheck protection program

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Restaurants that received a Paycheck Protection Program (PPP) loan in the first round of the plan will be able to apply for a second advance of aid starting Wednesday, albeit with several changes to the loan policy – including a $ 2 million cap on the loanable amount.

Companies that have multiple branches can borrow up to $ 4 million in total, and publicly traded companies are not eligible.

To ensure that small businesses are the primary beneficiaries of the $ 284 billion earmarked for the new incarnation of the program, eligibility is also limited to restaurants and other businesses that employ fewer than 300 people per location.

When the program was initially set up at the start of the pandemic, companies could apply if their payroll included up to 500 full-time employees and loan amounts were capped at $ 10 million. This time, the loans are capped at 3.5 months of an applicant’s payroll for the 12 months leading up to the loan or all of 2019, up to $ 2 million.

Applicants must have experienced a decrease in sales of at least 25% in each quarter of 2020. If the loan amount applied for exceeds $ 150,000, the prospective borrower must provide evidence of the decline in sales in advance. If the amount is $ 150,000 or less, proof of this is not required until the borrower applies for loan waiver.

Certain information remains the same. The interest rate is still 1% for a term of five years. And the loans are still forgivable if the money is used to meet certain specific costs.

Rent, payroll, usage costs and utilities remain on this list of covered expenses. This time the list has been expanded to include reopening costs; Spending on personal protective equipment and other anti-COVID protection measures; and the usual business expenses of a company.

Additionally, the money can be spent over a period of eight to 24 weeks set by the borrower before March 31st. When the program was first set up, restaurateurs complained that they received the funds within eight weeks of receiving the funds – a time when many of the recipients were closed due to COVID-19 safety protocols and working capital was not needed. The time frame was later changed to 24 weeks.

The credit window will remain open until March 31st. Second borrowers must use all of the money they were loaned in the first iteration of the program until their second loan is paid off.

The Act creating the second round of the Paycheck Protection Program states that amounts waived will not be treated as taxable income, a reversal of a decision by the Internal Revenue Service that upset the industry. In addition, waived amounts will not be taken into account when determining whether 2020 revenue has decreased by at least 25% in at least one quarter.

Lending to first-time borrowers under the Paycheck Protection Program started on Monday. The first round of loanable funds was distributed to municipal lenders to direct more money to women and minorities.

The first round of credit proved to be a lifeline for many restaurants, although the original agreement proved flawed and controversial. A number of large public restaurant companies were found to be recipients, leading many to return the money. Many applicants complained that the process was difficult to use and appeared to favor companies that had a longstanding relationship with the participating vendors.

Due to time constraints, the PPP policies and procedures published by the program’s administrator, the US Small Business Administration, have been issued as final rules, rather than proposals that may change after the public has had time to analyze them.

The new program was created under a law that went into effect on December 27th by President Trump. President-elect Biden has called this aid package a “down payment” and promised to provide more aid to hard-pressed parts of the nation.

CORRECTION: In an earlier version of this story it was falsely reported that all companies can calculate their maximum PPP by multiplying their monthly payroll by 2.5, up to a maximum of $ 2 million. As a special concession to the catering industry, the legislature changed the multiplier to 3.5.

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