Steps to prepare for the next round of PPP

The new, roughly $900 billion, federal aid package signed by President Donald Trump extends a number of crisis-era small business programs such as the Economic Injury Disaster Loan program, providing working capital for struggling businesses, as well as the Employee Retention Tax Credit. The law also reopens the Paycheck Protection Program. 

Here are six things to do now to help you get ready for the next round, according to Inc. magazine:

1. Determine your eligibility. The program will be open to companies that either didn’t get a first PPP or those that already got one but also suffered significant revenue losses as a result of the pandemic, or closed and need more help. For that second draw, eligible business owners need to demonstrate a 25% revenue drop in any one quarter in 2020 compared to 2019. The second draw is limited to companies with 300 employees or fewer.

2. Run the numbers. Just like the original PPP, first authorized by the Cares Act in March, the amount of PPP2 loans will be a product of your 2019 average monthly payroll costs multiplied by 2.5. All loans will be capped at $2 million; original PPP loans were capped at $10 million. An industry-specific allotment for restaurants and hotels allows them to seek forgivable loans based on 3.5 times their monthly payroll costs, up to $2 million.

3. Get your books in order. Ami Kassar, founder and CEO of MultiFunding, a small-business loan adviser based in Ambler, Pennsylvania, notes that this time in particular, lenders and the Small Business Administration may want to see proof of your losses.

4. Revisit your PPP forgiveness application. Those who received PPP loans for which they don’t expect to receive full forgiveness should read the now comprehensive list of expenses covered by the new law. According to the bill, borrowers that have already applied for forgiveness and received a decision before the law’s enactment are prohibited from reapplying for forgiveness.

5. Recalculate business expense deductions. The new bill clarifies a major outstanding question under the Cares Act: Are expenses paid using forgiven PPP funds tax deductible? This law says, yes, according to Bill Smith, managing director for CBIZ MHM’s National Tax Office in Bethesda, Maryland.

6. Call your lender. San Diego State University finance professor Stephen Brincks points out that if the PPP2 is anywhere near as popular as the first round of PPP—when funds ran out in two weeks—you’d better connect with your lender, fast. Read the full story from Inc.