PPP Round 2: Who’s Eligible & The Summary of Terms

by Karen Young

If your business or nonprofit did not get funds from the first round of the Paycheck Protection Program (PPP), and maybe even if it did, you could get another bite at the apple. Your business/nonprofit may also be eligible to re-apply in the next round if you were rejected in the first round OR if you used up your first PPP loan (with some exceptions) if you can prove that your receipts are down at least 25% in at least one equivalent quarter from 2019 and 2020.

On December 27, 2020, Congress passed, and the President signed into law, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act to allocate an additional $284 billion of PPP funding for small businesses and nonprofits. There are some differences with the first round of PPP loans. This round caps the loan amount at $2 million, compared to $10 million in the previous round. The focus of this stimulus package is to make funds accessible to smaller and harder-hit businesses. Congress and the SBA are implementing steps to get funding to truly small and underserved businesses and certain sectors, namely, the hospitality industry.

Accordingly, restaurants, hotels, and other establishments providing customers with lodging and/or preparing meals, snacks, and beverages can apply for a higher loan amount than other business types. Further, community banks will receive access to the PPP 2.0 at least 2 days BEFORE other financial institutions. The Small Business Administration announced that it will give community financial institutions (defined as those with $1 billion or less in assets) EXCLUSIVE ACCESS to the PPP portal for at least the first two days once it reopens on January 11, 2021.

In addition, this round of PPP expands eligibility to additional types of nonprofit organizations that had not been eligible to receive PPP funds in the past. Now eligible are 501(c)(6) organizations, which include business leagues, chambers of commerce, real estate boards, boards of trade and similar organizations, along with nonprofit destination marketing organizations with fewer than 300 employees that receive less than 15% of their gross receipts and expenses from lobbying activities. Other organizations included in this round of funding include housing cooperatives with fewer than 300 employees, news organizations with fewer than 500 employees at any physical location, and nonprofit public broadcasting entities.

PPP 2.0 makes forgiveness easier for businesses/nonprofits that use most of the funds for payroll costs and makes the funding tax-free. Further, by offering businesses/nonprofits whose PPP applications were originally rejected another attempt at the loan program, those businesses/nonprofits may be able to survive this economic crisis that has lasted longer than so many anticipated. With this round of funding, greater clarity is provided surrounding the documentation that businesses/nonprofits need to provide in their application, so the risk of rejection may be lower and encourage applicants who were rejected originally to re-apply.

See the full summary of the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act/PPP 2.0 in our overview linked at our website here.