As you may know, the Consolidated Appropriations Act, 2021 (CAA, 2021) introduced a new round of PPP loans to help individuals, families, businesses, and others affected by the COVID-19 pandemic.
The new round of PPP, or “PPP2” as some are calling it, contains many similarities to the first round of the PPP but with several important differences. Enclosed is recent guidance published by the SBA regarding the eligibility requirements for the new PPP loan on a high level for your review.
Who is Eligible to Apply?
For PPP2, there are certain restrictions in the eligibility. Previous PPP recipients may apply for another loan of up to $2 million, provided they:
- Have 300 or fewer employees.
- Have used or will use the full amount of their first PPP loan.
- Can show a 25% gross revenue decline in any 2020 quarter compared with the same quarter in 2019.*
- Effectively has no businesses that are affiliated with China.
*In a later SBA guidance, a borrower that was in operation in all four quarters of 2019 is deemed to have experienced the required revenue reduction if it experienced a reduction in annual receipts of 25 percent or greater in 2020 compared to 2019.
Gross Receipts Decline:
For a for-profit business, gross receipts generally are all revenue in whatever form received or accrued (in accordance with the entity’s accounting method, i.e., accrual or cash) from whatever source, including from the sales of products or services, interest, dividends, rents, royalties, fees, or commissions, reduced by returns and allowances but excluding net capital gains and losses.
Gross receipts of a borrower with affiliates are calculated by adding the gross receipts of the business with the gross receipts of each affiliate.
Gross receipts do not include the following:
- Taxes collected for and remitted to a taxing authority if included in gross or total income, such as sales or other taxes collected from customers (this does not include taxes levied on the concern or its employees);
- Proceeds from transactions between the business and its domestic or foreign affiliates; and
- Amounts collected for another by a travel agent, real estate agent, advertising agent, conference management service provider, freight forwarder or customs broker.
- The amount of any forgiven First Draw PPP Loan or any EIDL advance, which are not subject to federal income tax, is not included in the calculation of “gross receipts”.
Affiliated with China
Businesses with connections to China should proceed with caution when deciding whether to apply for funds from round two of the federal Paycheck Protection Program. New restrictions limit the eligibility of companies with “significant” ties to Asia’s largest economy and may expose such applicants to increased government scrutiny. In section 311 of the Consolidation Appropriations Act 2021 there is a specific section that excludes entities that are affiliated with China to participate in the second round of PPP loan.
Here are the 4 types of associations that will not be allowed:
- Created in or organized under the laws of China or Hong Kong even if they have US operations.
- Has significant operations in China or Hong Kong.
- Has a Chinese owner of more than 20% interest.
- Has a board member that is a Chinese resident.
The SBA loan application is on a FIRST IN FIRST OUT BASIS until the money runs out. We strongly recommend you look into the details of the program to see if you are interested or eligible for this program AS SOON AS POSSIBLE. The current due date is May 31, 2021.
If you believe that you are eligible and have not explore the opportunity of the PPP2 funding, please let us know if you need our assistance with the application process or have any questions. Thank you.