Six Changes Made to the Paycheck Protection Program in 2021 |

Six Changes Made to the Paycheck Protection Program in 2021

ppp 2021

The US Treasury and the Small Business Administration have reopened the Paycheck Protection Program once again.

In December of 2020, the U.S. government signed another COVID relief package into law. Another $284 billion in additional lending will now be available to eligible businesses even if they already received a loan months ago. The new loans are supposed to assist hard-hit restaurants, while still flexible for all small businesses. Even micro businesses that were unable to receive funding during the first two rounds of lending should have access this time around.

The updated Paycheck Protection Program will feature the following:

Second PPP Loans

Businesses that already received a PPP loan in previous rounds will be allowed to apply under three conditions: they must not be a public company; cannot employ more than 300 people; have used, or will fully use their first loan for authorized uses; and can show at least a 25% drop in gross receipts in the first, second or third quarters of this year compared to the same quarter in 2019.

Targeted Funds

The most vulnerable businesses are set to receive between $15 billion and $25 billion. These funds will be allocated to community development financial institutions. These are the banks and lenders that lend to minority-owned businesses in underserved communities. Other beneficiaries include businesses with fewer than 10 employees, as well as those in low-income areas.

Bigger Loans for Restaurants

Restaurants may now apply for loans equal to 3.5 times their monthly payrolls. All other eligible businesses may get a loan equal to 2.5 times that amount. However, while the previous cap was $10 million, the new limit is $2 million.

Greater Flexibility

The new loans appear not be as strict in terms of use and forgiveness. Businesses must still use 60% of the money for payroll expenses. However, they can use the remainder to cover an even broader range of expenses than they were allowed in previous rounds of PPP lending. The new loans can now be spent on personal protective equipment and other expenses related to COVID restrictions. Funds can also be allocated for certain operations, property damage and supplier costs.

Simpler Forgiveness Process

Most importantly, the forgiveness process has been simplified. Now, businesses that borrow $150,000 or less are only required to submit a one-page certification that includes the number of employees the business retained because of the loan; an estimate of how much was spent on payroll; and the total loan amount. The final step is to confirm that the information they provided is accurate; and that they complied with loan requirements.

Better Tax Break

Loan recipients will receive a better tax break this time around. If loans are used for authorized purposes, then they are tax-free. 

If your business qualifies, apply for a new PPP loan. For more information on the reopening of the program and changes to it, the Treasury Department and Small Business Administration put out guidance here.   

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