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Can Businesses and Nonprofits Apply for Paycheck Protection Program 2

The SBA/Federal Government has released a second round of the Paycheck Protection Program (PPP loan Round 2) as of Monday, January 11, 2021 for new loans for businesses and nonprofits. For the first week, community lenders (CDFI) and local banks Paycheck Protection Programthat service underserved small businesses or nonprofits will be prioritized to make up for the Payroll Protection Program’s (PPP loan 1) original shortfall. After the first week, the program will be open to all businesses, nonprofits, and independent contractors regardless if they received money from the first PPP loan.

PPP Loan 2 stimulus package(second round of PPP) has changed certain rules from the original Paycheck Protection Program that was enacted as part of the Pandemic Coronavirus Aid, Relief, and Economic Security Act (CARES Act). All of the Paycheck Protection Program’s original $349 billion was allocated between April 3 and April 16, 2020. Paycheck Protection Program Second Round was appropriated for up to $275 Billion in additional PPP funding.

Borrowers can be matched with qualified PPP lenders using SBA Lender Match.  You can apply for a Second Draw PPP Loan from January 13, 2021, until March 31, 2021

Qualify: 25% reduction in gross receipts for the total year or any comparable quarter

If you can prove that your business or nonprofit’s gross revenue (gross receipts) was 25% less in 2020 than in the same period then in 2019 for either the full year or for one quarter (3 months) then you will qualify for a PPP loan 2 as long as a few other conditionals are meet.

You must have used or will use the full amount of the first round for authorized expenses. In PPP Round 1 those expenses include payroll, rent, or commercial mortgage interest.

Second Draw PPP Loans can be used to help fund payroll costs, including benefits. Funds can also be used to pay for mortgage interest, rent, utilities, worker protection costs related to COVID-19, uninsured property damage costs caused by looting or vandalism during 2020, and certain supplier costs and expenses for operations. More details can be found at the SBA website (Small Business Administration).

SBA will forgive loans if all employee retention criteria are met, and the funds are used for eligible expenses.

  • PPP loans have an interest rate of 1%.
  • Loans issued prior to June 5 have a maturity of two years. Loans issued after June 5 have a maturity of five years.
  • Loan payments will be deferred for borrowers who apply for loan forgiveness until SBA remits the borrower’s loan forgiveness amount to the lender. If a borrower does not apply for loan forgiveness, payments are deferred 10 months after the end of the covered period for the borrower’s loan forgiveness (either 8 weeks or 24 weeks).
  • No collateral or personal guarantees are required.
  • Neither the government nor lenders will charge small businesses any fees.

Businesses will not be taxes on PPP loan forgiveness(forgivable loan)

When the initial PPP loan (Paycheck Protection Program) was first rolled out it was misunderstood by many business owners that the program meant free money as long as the loan was used for qualified expenses. However, the IRS stated that all PPP loans would still have to count as business income and therefore, it would have to be taxed at the end of the year.

But finally, Congress has come to the rescue and said that the whole point of the program was to provide needed loan money for wages and other key expenses. The loan forgiveness was key too, saying that despite normal tax rules if the loan is forgiven, that will not be income. Now the third piece of the puzzle is finally in place, you can still claim normal tax deductions for business expenses paid with PPP money. The latest COVID relief law states that “no deduction shall be denied or reduced, no tax attribute shall be reduced, and no basis increase shall be denied, by reason of the exclusion from gross income provided by [the loan forgiveness provision that says forgiven PPP loans will not count as income].”  The text of the new legislation can be found here

Supplemental materials

Affiliation rules

Reapplying and loan increases for PPP Loan

Existing PPP borrowers that did not receive loan forgiveness by December 27, 2020 may:

  • Reapply for a First Draw PPP Loan if they previously returned some or all of their First Draw PPP Loan funds, or
  • Under certain circumstances, request to modify their First Draw PPP Loan amount if they previously did not accept the full amount for which they are eligible

About Financing Solutions Business Line of Credit

Financing Solutions, an A+ and 5 stars rated BBB company, is a direct lender that provides a small business line of credit and a line of credit to nonprofits who have at least $400,000 in yearly income. If you do not qualify for the PPP loan program, or even if you do, setting up a line of credit is a smart move.

Financing Solutions business financing program costs nothing to set up, nothing until used and when used, is inexpensive. The credit line requires no collateral and no personal guarantees.

Organizations will set up the line of credit in advance so that if there are ever any cash flow issues, they have a cash back up plan. The time to set up a credit line is when you don’t need it.

If you would like to see if your organization would-be approved and for how much, please feel free to fill out the no-obligation, 2-minute line of credit application here.


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