The Paycheck Protection Program in 2021

[Update as of March 26, 2021: The Paycheck Protection Program application deadline is now May 31, 2021 (extended from March 31, 2021)]

That’s right, we’re still talking about the Paycheck Protection Program– and it remains to be one of the most valuable options available for small businesses today. With the entire loan amount being fully-forgivable when used within the guidelines, it’s a hard one to beat. 

Since the Consolidated Appropriations Act was signed into law, eligible businesses can apply for a maximum of two PPP loans. 

Here is the breakdown of the PPP as it stands today:

Eligibility and Amounts

First-draw loans and second-draw loans have different eligibility requirements and maximums, so we will discuss them separately.

First-Draw 

The following guidelines apply to businesses that have not previously accepted a PPP loan.

Eligibility

You are eligible for a first-draw loan if:

• You have 500 or fewer full-time, part-time, or seasonal employees
• Your business was operational before February 15, 2020, and remains in operation

Loan Amount

The maximum first-draw loan amount is the lesser of:

•  2.5x your average monthly payroll and healthcare costs 
• $10 million

Find out how to calculate the maximum loan amount for your business type here.

Second-Draw 

The following guidelines apply to businesses that have previously accepted a PPP loan and are interested in applying for additional PPP funding.

Eligibility 

You are eligible for a second-draw loan if:

• You have 300 or fewer full-time, part-time, or seasonal employees
• if you have multiple locations, you may not have more than 300 employees per location.
• You can demonstrate a revenue reduction of at least 25% in the first, second, or third quarter of 2020 (compared with the same quarter in 2019). 
• You can use tax filings to demonstrate this.
• You have used or will use the full amount of the first-draw PPP.
• Your business was operational before February 15, 2020, and remains operational.

Loan Amount

The maximum amount for a second-draw loan is lesser of:

• 2.5x your average monthly payroll costs and healthcare costs in the year prior to when the loan was received or within the calendar year
• 3.5x your average monthly payroll costs and healthcare costs in the year prior to when the loan was received or within the calendar year for restaurants, bars, and other hospitality and entertainment businesses.
• (View the full list of businesses classified under Code 72 by NAICS)

Special considerations for restaurant franchisees, multi-concept operators, and multi-unit operators:

• Franchisees: A franchisee that meets the above requirements can apply for a PPP loan. The franchisor does not apply on your behalf, and the $10 million (first-draw) or $2 million (second-draw) cap applies to each franchisee entity.
• Multi-Unit Operators: If you own more than one restaurant location operating under the same business entity and employee 500 or fewer employees at each location, you are eligible for a PPP loan— even if your total employee count across all locations is more than 500. Your entire entity’s loan cap is $10 million (first-draw) or $2 million (second-draw). 
• Multi-Concept or Multi-EIN Operators: If you own multiple brand concepts or multiple locations of a single brand that operates under separate entities, each entity that employs 500 or fewer employees can apply for a PPP loan. The $10 million (first-draw) or $2 million (second-draw) cap applies to each entity. 

Loan Forgiveness

The best part about the PPP is that the loans are forgivable if you follow a few rules.

Forgiveness Guidelines

To receive absolute forgiveness, you have to:

• Maintain employee counts and salary levels
• In other words, keep the same number of people employed that you used when calculated your loan and don’t reduce their pay by more than 25%. It does not have to be the same people as long as you retain the number.
• You also will not be penalized for employees that you attempt to rehire that decline the offer.
• Spend at least 60% of the loan on payroll costs
• Gross salary or wage
• Tips
• Gross commissions
• Paid leave (vacation, family, medical or sick leave, not including leave covered by the Families First Coronavirus Response Act)
• Allowances for dismissal or separation paid
• Employee benefits costs (including retirement contributions) 
• Up to 40% of the loan can be spent on other eligible expenses
• Rent, utilities, and interest on mortgage payments
• Operations expenses: software subscriptions or services used in your business operations (like Symply), such as payroll, sales, billing, and bookkeeping 
• Property damage repairs: costs due to public disturbances in 2020 that insurance did not cover
• Supplier costs: essential purchases for your business that you obtained according to a contract, order, or purchase order that was in effect before you received the loan
• Worker protection expenses: costs for protective equipment or property improvements made to comply with local or state health guidelines

Forgiveness Applications

Multiple forgiveness applications have been published since the start of the program. Specific applications have a much easier forgiveness process and should be used to your advantage if you meet the requirements.

The Paycheck Protection Program Forgiveness Application
This is the original forgiveness application published and last revised in June 2020 and still in use. 
Who can use it: Anyone who has received a PPP loan

PPP Loan Forgiveness Application Form 3508EZ
This form is known as the EZ Loan Forgiveness Application and is a simpler and more streamlined version of the original application.
Who can use it: Any business that does not reduce employee wages by more than 25% during the covered period (or alternative covered period)

PPP Loan Forgiveness Application Form 3508S
The Simplified Loan Application was published in October to streamline the forgiveness process for smaller loans even more. The key difference is that borrowers of less than 50k are exempt from forgiveness reductions based on reductions in FTE count and reductions in employee salaries or wages.
Who can use it: Any business that borrowed less than $50,000

Simple Loan Forgiveness Application
The newest of the loan forgiveness applications is designed to simplify and streamline the process for loans under $150,000. It has not been published yet, but it will be a simple one-page form and making it easier for borrowers to obtain forgiveness.
The form will require the borrower to sign and certify a description of:

• the number of employees the borrower was able to retain because of the loan
• the estimated total amount of the loan spent on payroll costs
• the total loan amount

Who can use it: Any business that borrowed less than $150,000

The bottom line is that the point of the PPP is to help small businesses stay in business and keep people employed. Yes, it is a loan, but it is meant to be fully forgiven. If you approach the program with the mindset of turning it into a grant, it can become just that.