FAQs: Paycheck Protection Program (PPP)

The Paycheck Protection Program (PPP) is a loan program that originated from the federal Coronavirus Aid, Relief, and Economic Security (CARES) Act, enacted in March 2020. Through the program, the U.S. Small Business Administration (SBA) guarantees forgivable loans made by lending institutions to small businesses. The first round of PPP funding in 2020 totaled $349 billion and the second round of funding was $310 billion. The program closed on August 8, 2020 and was re-opened with the stimulus law passed December 21, 2020.

Yes. Getting another PPP loan is referred to as a Second Draw PPP Loan. The process will be faster/easier if you apply with the same lender that funded your first PPP loan because a lot of information will already be verified.

The amount you’ll get with a Second Draw PPP loan will be what you got the first time, with the exception that businesses in the food services and hospitality industries (businesses with NAICS code starting with 72) will receive 3.5 times their monthly payroll expense instead of the original 2.5 times.

To be eligible for a Second Draw PPP Loan, the borrower must have experienced a revenue reduction of 25% or greater in 2020 relative to the same period in 2019.
- Borrowers receiving more than $150,000 are required to provide documentation at the time of their second draw PPP loan application.
- Borrowers receiving less than $150,000 will be required to provide proof of their revenue reduction when they apply for their loan to be forgiven.

Regardless of if you are required to provide proof at the time of your loan application, it is important to evaluate if you meet the revenue reduction requirement to ensure your eligibility.

The revenue comparison is between your gross receipts in for the full year or one quarter of 2020 compared to the same period in 2019. Gross receipts are your total sales or income for the quarter and they do not take into account your cost of goods sold or other business expenses.

We have a short online form that will do the math for you HERE.
But note: this form is informational only. You will be asked for documentation to substantiate your revenue loss, such as Profit & Loss statements, gross receipts tax forms, tax returns, etc.

No, per the new legislation passed in December 2020, the first PPP loan no longer needs to be counted as income.

If you started your business before July 1st, 2019, you can compare any quarter in 2019 to the same quarter in 2020.

If you started your business after July 1st, 2019 you can choose either the third or fourth quarter of 2019 and compare your sales to any period during 2020 to show your revenue reduction. For example, if you started your business in August of 2019, you can compare your Q3 or Q4 2019 sales to any quarter within 2020.

If you started your business during Q4 or 2019, you can compare your Q1 2020 revenues to any other quarter throughout 2020.

If you were not approved before, you may submit a new application, but the eligibility criteria are the same. If the business or one of the owners did not meet the original eligibility criteria, you likely will not qualify now. First time PPP loan applicants do not need to prove revenue reduction to qualify.

The law states that 60% of the PPP loan funds must go towards payroll and employee benefits costs and the remaining 40% can be spent on other eligible expenses. The stimulus bill passed on December 21, 2020 expanded the categories of other eligible expenses which now include:

· Mortgage interest payments
· Rent and lease payments
· Utility bills
· Operations expenditures: software, cloud computing, and other human resources and accounting needs
· Property damage costs: damage due to public disturbances that occurred in 2020 and were not covered by insurance
· Supplier costs: payments to a supplier pursuant to a contract or purchase order in effect prior to taking out the PPP loan and are essential to the borrower’s operations
· Worker protection expenditure: Personal protective equipment (PPE) and adaptive investments to help the borrower comply with health and safety guidelines

The Economic Injury Disaster Loan (EIDL) and Paycheck Protection Program (PPP) are run both run by the Small Business Administration.

Paycheck Protection Program loans are not automatically forgiven. You must request forgiveness from your lender. With the stimulus bill passed on December 21, 2020, the process to apply for forgiveness was simplified for PPP loans of $150,000 and less. Instead of submitting paperwork to have your forgiveness amount calculated, borrowers with loan amounts under $150,000 must now provide a simple certification to their PPP lender. Second Draw PPP Loans require proof that the business or organization experienced a drop of 25% or more in gross receipts/revenues.

The amount of loan forgiveness shall be calculated (and may be reduced) in accordance with the eligible use of funds requirements of the Paycheck Protection Program. Sixty percent or more of the loan proceeds must be used for payroll expenses and the rest must be used for other eligible expenses (including rent payments, covered mortgage interest expense payments, and covered utility expenses).

No. The note must be fully amortizing with no balloon payment.

There are no fees and neither collateral nor personal guarantees are required. All loans will accrue interest at 1% fixed annually. Payments are deferred initially. You may request forgiveness for part or all of the loan amount. Any amount of the loan that is forgiven essentially becomes a grant that does not need to be repaid. Any amount of the loan that is not forgiven must be repaid.

Through August 8, 2020, DreamSpring made over 2,400 PPP loans for $68.1 million supporting 11,190 jobs.

No. Any amounts that a business has paid to an independent contractor or sole proprietor should be excluded from the business’s payroll costs. However, independent contractors and sole proprietors can apply for a PPP loan themselves.

Yes ‐ the primary purpose of this loan is to make payroll for your employees and/or replace lost income for sole proprietors. You are expected to maintain or rehire any staff members which were let go. However, there are exceptions for businesses that are unable to re-hire, must let go of employees for cause, or are restricted from operating at pre-crisis capacity to comply with health requirements related to worker or customer safety.

For more information on Paycheck Protection Program Forgiveness, please visit our FAQ on this topic.