What the New Round of the PPP Means For Your Business

Chip Knight, January 29, 2021

It’s our mission to help you realize your dreams and to ensure that those dreams continue to grow and thrive. That's why we're pleased to announce that we are currently accepting applications for the latest round of funding offered through the U.S. Small Business Administration’s (SBA) Paycheck Protection Program (PPP). Whether you are a first-time applicant or a borrower seeking a second draw loan, we understand the urgent need for relief and we are working around the clock to facilitate PPP loans for our clients. 

We’re processing applications for eligible small business owners and self-employed individuals who have a primary checking account with us. The deadline to apply is March 31, 2021, or until PPP funds run out. Visit our Paycheck Protection Program page to review loan terms, eligibility, FAQs, resources, and much more, or contact us at 877-538-3335, Monday - Friday, 8:00 am - 5:00 pm, CT.

Please note that this information is being provided as a resource for our clients. All information is based on our current understanding of the terms and conditions applicable to the Paycheck Protection Program (PPP) as set out in the Congressional Act, and is subject to further interpretation and clarification as regulations and guidance are issued by various regulatory agencies, including the SBA.

 

What the new round of PPP loans means for your business

 

What is the Paycheck Protection Program (PPP)?

Established to support small businesses (including sole proprietors and independent contractors) who have been negatively impacted by COVID-19, the PPP offers 1% interest loans for up to $10 million for First Draw Loans and up to $2 million for Second Draw loans.

Calculated primarily on your 2019 or 2020 average payroll (based on the year being used to calculate the maximum loan amount) or net revenue for 2.5 months (or 3.5 months for entities that fall under the NAICS code 72 for Accommodation and Food Services Industry), these loans may be up to 100% forgivable—as long as:

  • 60% or more of the money is used for employee (or self-employed) compensation
  • Up to 40% is used for qualified business costs, and
  • Other rules including wage and employee retention are followed – check out our Eligible Expenses Reference Guide.

While the PPP basics remain generally the same, this new round of funding allows for more small businesses to take advantage of the program and provides increased funding to some of the hardest-hit industries. Participants with loans of $150,000 or less will also benefit from the new, simplified forgiveness application that streamlines the forgiveness process. 

If this is the first time you are applying for a PPP loan (First Draw), the eligibility criteria includes the following requirements:

  • Employ not more than 500 employees
  • Have not received a PPP loan
  • Business in operation on February 15, 2020
  • Currently in operation 

Second Draw PPP Loans

The Paycheck Protection Program (PPP) now allows certain eligible borrowers that previously received a PPP loan to apply for a Second Draw PPP loan with the same general loan terms as their First Draw PPP loan. Second Draw PPP loans can be used to help fund payroll costs, including benefits. Funds can also be used to pay for mortgage interest, utilities, rent and certain supplier costs and operational expenses.

You are generally eligible for a Second Draw PPP loan if you meet the criteria below:

  • Employ not more than 300 employees (with limited exceptions for NAICS code 72 and eligible news organizations)
  • Have used or will use the full amount of your first PPP loan on or before the expected date on which the second draw PPP loan is disbursed to the borrower
  • Demonstrate at least a 25% reduction in gross receipts in a quarter in 2020 relative to the same quarter in 2019 (businesses that did not operate during first half of 2019, that operated in second half of 2019 can look to a reduction in any quarter of 2020 compared to 2019)
  • Currently in operation

New features for PPP Loan Forgiveness:

  • While forgiveness is not automatic (you have to apply), the SBA has provided a streamlined, one-page forgiveness application for loans less than $150,000.
  • EIDL (Economic Injury Disaster Loan) no longer reduces loan forgiveness if you received an EIDL advance from the SBA.
  • Qualified non-payroll business costs paid for using PPP funds are now tax deductible.
  • Forgivable “non-payroll costs” may now include:
    • Business mortgage interest payments*
    • Interest payments on a loan (such as an auto loan) needed to perform your business*
    • Business rent and lease payments*
    • Business utilities payments*
    • Operational expenses for business software and cloud computing services and other human resources and accounting needs that facilitate business operations
    • Payments to a supplier for goods that are essential to the operations of the borrower pursuant to a contract or purchase order in effect before the PPP loan is disbursed or with respect to perishable goods
    • Worker protection expenditures required to comply with public health guidance related to COVID-19 (such as personal protective equipment, drive-through windows, and sneeze guards)
    • Property damage costs related to looting due to public disturbances in 2020 that are not covered by insurance or other compensation

*If you are self-employed, you must have claimed a deduction on your 2019 or 2020 taxes for expenses indicated with an asterisk above to be forgiven.

With a fixed interest rate of 1%, unforgiven amounts of PPP loans issued before June 5, 2020 are due two years from the date or origination. Loans made after June are due in five years. Payments on PPP loans may be required before maturity depending on if or when a borrower applies for and receives full or partial forgiveness. 

Your Hancock Whitney banker can help

We understand that the pandemic has put many clients in a position of uncertainty, and we’re here to help. We’ve been your partner through good times and bad, and you can rest assured that we’ll work tirelessly to help you find financial solutions for your business amid this unprecedented event.

For more information on the Paycheck Protection Program, visit our PPP page or contact us at 877-538-3335, Monday - Friday:  8:00 am - 5:00 pm, CT.