PPP: What We Know Now
December 7, 2020
Small businesses struggling amid the pandemic may soon get some much-needed relief in the form of a new COVID-19 stimulus package. Congress has been deadlocked on COVID relief for months, but a new compromise bill is gaining bipartisan support as a starting point. The legislation is expected to move quickly, likely passing by December 9, being enacted on December 11, and subsequently implemented by the Small Business Administration (SBA) thereafter.
The $908 billion proposed stimulus package includes $288 billion for a second round of Paycheck Protection Program (PPP) loans and Economic Injury Disaster Loans (EIDL). These additional loans will likely be available for borrowers with 300 or fewer employees who have incurred a decline in year-over-year revenue (to be defined). The new legislation would likely simplify loan forgiveness—a prominent feature of the original PPP —for loans of $150,000 and less, which is a shift from the current threshold of $50,000. Another feature of the proposed stimulus package is the ability to deduct qualified business expenses paid with PPP loan proceeds, which was (and continues to be) a source of confusion in the original PPP. We expect that the eligibility criteria for PPP loans will be similar to the current guidelines, which use payroll as a determining factor.
Many provisions of the new legislation are still being considered, including whether or not 501c (6) entities will be eligible for relief loans.
As of November 26, 11 percent of the PPP loans (equal to 15 percent of the total funding) have been processed by lenders and forwarded to the SBA for forgiveness consideration. The SBA is requesting additional information from borrowers with loans of all sizes, not just those over $2 million. The American Institute of Certified Public Accountants (AICPA) is recommending that borrowers with loans over $2 million replace the requested form 3509 with a narrative explaining the economic necessity of the loan, but it stands to be determined whether the SBA would accept this deviation from previous guidance. As a reminder, borrowers have 10 days to submit their completed 3509 forms.
If you have questions about the proposed legislation, the current PPP guidelines, or other matters, please visit our PPP Learning Center or get in touch with your Geffen Mesher professional.