Paycheck Protection Program Updates

The latest significant changes to the program came through Congressional action via the Economic Aid Act in December 2020, and Executive Action in March 2021.

Please note in order to maximize forgiveness, you must spend a minimum of 60% of the total of the loan on eligible payroll expenses (or owner-compensation replacement,  subject to caps).

The Executive Action from March 2021 changed the calculation for Schedule-C filers only, allowing those applicants submitting an application for First-Draw or Second-Draw after as of March 4, 2021. Applicants who already received funds are not able to increase their loan amount, however those submitting a new application may now use line 7 for Gross Revenue in place of line 31. Please note there are differences in the calculation for those with and without employees. Contact us for assistance and view our recorded webinar on this update.

If you are looking for help applying for the Paycheck Protection Program, or perhaps you are ready to apply for forgiveness, CTSBDC has a team of advisors ready to help. Request advising today to get started.

HOW DOES THE LOAN WORK?

You are responsible for calculating the correct amount of the loan. The amount you qualify for is based on eligible payroll expenses and in some cases owner-compensation based on the entity type.

LLCs, Sole-Proprietors, Partnerships, and Farms can add owner-compensation to the calculation. S-Corps, C-Corps, and Non-Profits are expected to be paying the owners through payroll and cannot add owner-compensation.

Eligible payroll costs include:

  • Salaries & hourly gross wages, tips, commission and other cash-compensation as reported in 941 filings, capped at an annualized rate of $100,000 per employee
  • Payment for vacation, parental, family, medical or sick leave (except those amounts that can receive a credit via FFCRA)
  • Health, dental, vision, life, disability insurance
  • Retirement benefits
  • SUTA

For Independent Contractors:

  • Wages, commissions, income or net or gross earnings from self-employment.

WHAT CAN I USE THE MONEY FOR?

Once you calculate the amount your are eligible for, you have a period of 8-24 weeks at your choosing, called your "Covered Period." You must use the funds received starting day one on allowable payroll and non-payroll expenses.

PAYROLL COSTS

Compensation to employees in the form of:

  • salary, wages, commissions, or similar
  • cash tips or the equivalent
  • payment for vacation, parental, family, medical, or sick leave (except FFCRA)
  • allowance for separation or dismissal
  • payment for employee benefits including group health care or group life, disability, vision, or dental insurance, including insurance premiums, and retirement
  • SUTA

For an independent contractor or sole proprietor: wages, commissions, income, or net earnings from self-employment, or similar

NON-PAYROLL COSTS

  • mortgage interest payments (but not mortgage prepayments or principal payments)
  • rent payments
  • utility payments
  • interest payments on any other debt obligations that were incurred before February 15, 2020 (allowable use but not forgivable)
  • refinancing an SBA EIDL loan made between January 31, 2020 and April 3, 2020 (allowable use but not forgivable)
  • covered operations expenditures
  • covered property damage costs (if applicable)
  • covered supplier costs
  • covered worker protection expenditures

HOW CAN I GET THE LOAN FORGIVEN?

Overall the forgiveness process remains the same as before. We will provide additional guidelines as the SBA releases additional documentation.

Be sure to use the funds only towards allowed, forgivable expenses, as detailed above.

Important Highlights

60/40 Rule Remains: At least 60% still has to be used for allowable payroll costs

Covered Period: Allows borrowers to select their loan forgiveness covered period starting on the day of disbursement of the funds, and choosing a time period between 8 and 24 weeks.

Simplified Forgiveness for Loans Under $150k: There are now three different application forms and processes based on your loan amount, and whether you were able to comply with the requirements of the program regarding number of employees & wages.

A simplified forgiveness process allows those with loans under $50,000 to be exempt from forgiveness reductions based on FTE (full-time equivalent) or salary/wage reductions.

In addition, those with loans under $150,000 may also use a simplified forgiveness application as long as they did not eliminate FTEs nor reduce salaries/wages beyond 25%.

EIDL Advances: No longer have to be subtracted from PPP forgiveness.

Please contact a CTSBDC advisor if you need help with PPP Forgiveness.

There are some differences in who can apply and how much they are eligible for if it depending on if you are applying for a PPP loan for the first time or second time. Read more about those differences below. We also have fact sheets available for each.

First Draw

FIRST DRAW

Who can apply?

ELIGIBILITY

You are eligible to apply if you are a:

Small business, self-employed individual, sole proprietor, independent contractor, or small agricultural cooperative, non-profits including churches with 500 employees or less; and accommodation and food services operations with fewer than 300 employees per physical location.

  • Expanded eligibility for some 501(c)(6) organizations with 300 employees or less
  • Local newspapers, TV, and radio stations previously ineligible due to affiliation rules

YOU MUST HAVE BEEN IN OPERATION ON FEB. 15, 2020 TO BE ELIGIBLE.

How do I calculate how much I can get?

You would calculate it based on the eligible payroll costs mentioned above.

Once you add all your eligible payroll costs for the year, you would divide that number by 12 to get your monthly average, and multiply that amount by 2.5.

The maximum amount you can get on a First-Draw loan is $10 million.

Second Draw

SECOND DRAW

Who can apply?

If you previously applied and received a Paycheck Protection Program loan:

ELIGIBILITY

You are eligible to apply if you are a:

Small business, self-employed individual, sole proprietor, independent contractor, or small agricultural cooperative, non-profits including churches with 300 employees or less; and accommodation and food services operations with fewer than 300 employees per physical location.

  • Expanded eligibility for some 501(c)(6) organizations with 300 employees or less
  • Local newspapers, TV, and radio stations previously ineligible due to affiliation rules

All second-draw applicants must:

  • Demonstrate at least 25% reduction in gross revenues between comparable quarters in 2019-2020
  • Have used all prior PPP funds by the time of application

PLEASE NOTE YOU CANNOT RECEIVE BOTH A GRANT FOR SHUTTERED VENUE OPERATIONS & A PPP FORGIVABLE LOAN.

How do I calculate how much I can get?

You would calculate it based on the eligible payroll costs mentioned before as you did with your First-Draw.

Once you add all your eligible payroll costs for the year, you would divide that number by 12 to get your monthly average, and multiply that amount by 2.5. The exception is for those in NAICS 72, who can calculate their maximum second-draw amount with a 3.5 multiplier instead of the 2.5.

The maximum amount you can get on a Second-Draw loan is $2 million.