How the Upcoming Round of the Paycheck Protection Program (PPP) Works

Congress signed the new Coronavirus stimulus bill into law on December 27, 2020. We’re still awaiting additional guidance from the SBA on rules for the program.

Unlike traditional banks, we’re proud to serve even the smallest of businesses, and our median PPP loan size is just $19,862. Financial technology institutions were truly there for America’s small businesses in 2020. A recent industry study shows fintechs reached many underserved minority-owned businesses, and BlueVine administered close to one-third of our PPP loans to those in the most disadvantaged communities.

Small businesses are the reason we’re here. Since 2013, BlueVine has provided over 200,000 small business owners with access to financing and banking services. When COVID-19 hit, we took action to provide fast SBA Paycheck Protection Program loans, funding $4.5+ billion to 155,000 small businesses, saving 450,000 jobs. 

New Coronavirus stimulus package commits $284.5B to small businesses

The pandemic continues to impact small businesses, and we applaud Congress for providing much-needed relief by reopening the PPP at $284.5B, allowing for initial and second draws, and simplified loan forgiveness for loans under $150K. 

Here’s a high-level summary of the new Paycheck Protection Program (PPP) round included in the bill:

TimelinePer the bill, the SBA has ten days to issue regulations after the signing date (December 27, 2020). The SBA may also determine the date that it will begin accepting applications from lenders, and BlueVine will let you know once our application is available.
Basic Two-Prong Structure● Second Draw PPP Loan: Small businesses that received a PPP loan under the first PPP program may be eligible for a second loan.
● Initial Draw PPP Loan: Small businesses that did not receive a loan under the first PPP program may be eligible for a loan under this new round.

Some portions are earmarked (i.e., these are amounts the SBA will hold in reserve, and are not limits):

● $15B for SMBs with 10 or fewer employees or loans of less than $250k in low-income areas
● $25B for Second Draw PPP Loans for businesses with 10 or fewer employees or loans of less than $250k in low-income areas
● $35B for Initial Draw PPP Loans
Eligible Borrowers● Businesses, some nonprofit organizations, self-employed workers and independent contractors are among those eligible. 
● Existing PPP borrowers may apply for a second loan, provided they have 300 or fewer employees and can demonstrate they experienced a 25% reduction in gross receipts during a quarter in 2020 compared with the same quarter in 2019.
● Additional eligible borrowers include:
○ Housing co-ops with no more than 300 employees
○ Certain broadcast and news organizations
○ 501(c)(6) nonprofits and “destination marketing organizations” that generally don’t engage in lobbying and have fewer than 300 employees
New Ineligible Businesses and Others (Initial Draw)● Businesses not in operation as of February 15, 2020
● Businesses that received grants under the new “live venue” program
● Publicly-traded companies
● The President, Vice President, heads of executive departments, Members of Congress, and their spouses
Second Draw Eligibility Must:

● Use First Draw funds before applying for a Second Draw
● Have no more than 300 employees
● Be in operation as of February 15, 2020
● 25% or more drop in gross revenue

Note: Currently, there are no restrictions on deciding to work with a different lender for the Second Draw.
Second Draw Ineligibility● Lobbying organizations
● Entities affiliated with China or Hong Kong
● Anyone representing a foreign government
● Businesses that receive grants under the new “live venue” program
● Businesses with multiple locations and over 300 employees per location
Second Draw AmountAmount of second draw = 2.5x average monthly 2019 payroll (3.5x for food services). 

● Hard cap at $2M
● Can only get one Second Draw
Expenses That Count As “Payroll” “Payroll Costs” means:

● Sum of payments to employees that are 

○ A salary, wage, commission 
○ Tips  Vacation, parental, family, medical or sick pay
○ Allowance for dismissal or separation
○ Payment for group health care benefits, including insurance premiums
○ Payment of retirement benefits
○ Payment of state or local tax on employee compensation (e.g., payroll tax)

New expenses that count as payroll include include employer-provided group insurance benefits (life, disability, vision, and dental)
New definition for seasonal employersThe new bill defines a seasonal employer to be an eligible recipient which: (1) operates for no more than seven months in a year, or (2) earned no more than 1/3 of its receipts in any six months in the prior calendar and this definition applies to any loan made before, on or after enactment including the forgiveness of the loan.
Increase in Loan RequestsBorrowers who returned some or all of their original PPP loan can re-apply.

Borrowers whose loan amounts have changed because of new rules can work with their lenders to get the additional amount. 
Live Venue GrantsSBA can provide grants to live venues.  Recipients can’t participate in PPP.
InterestInterest on PPP is non-compounding

Updates to PPP Loan Forgiveness

Forgiveness Eligible ExpensesExpanded to include:

● New “covered operations” like software, cloud computing and similar operating expenses
● Certain property damageEssential supplier costs
● Worker protections

Eligible “Payroll” expenses are expanded to include group insurance (life, disability, vision, and dental)

Allows existing loans to use the new expenses for forgiveness
Covered Period (For Forgivable Expenses)The Covered Period for the previous PPP round was 8 or 24 weeks. Now the Covered Period for all loans (including those made before this new law) can be 8 weeks, 24 weeks, or anywhere in between, but no later than March 31, 2021.
Sub-$150k Borrowers Simplified FormSimplified, one-page certification that only requires:
1. Description of employees they retained because of PPP
2. Estimated amount of PPP spent on payroll
3. Total amount of their PPP loanThe SBA has 24 days to issue a new form.

If you already received a PPP loan from BlueVine, we are not yet ready to accept forgiveness applications. We’ll email you once you can submit your online application.
Second DrawForgiven in the same manner as first draw.
EIDL ReductionsEIDL advances will no longer reduce the amount by which a borrower has its PPP loan forgiven. SBA will issue rules for borrowers who already received forgiveness.
Tax ImplicationsAny expenses you use to apply for forgiveness are now also tax-deductible.1 

We’re eager to do what we can to help the small businesses we love and will continue to keep our website updated with PPP news and BlueVine application availability. You can also sign up for regular updates from our team, including when you can apply.

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