On March 30th , President Joe Biden signed legislation that extended the application deadline from March 31st to May 31st for round two of the Paycheck Protection Program (PPP). The legislation also provides financial institutions with 30 additional days to process the loans.
The extension is a result of the PPP Extension Act of 2021 passed in March by both the House and Senate.
The PPP was originally established in March 2020 as a part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The program was established under the oversight of the Small Business Administration (SBA) to assist small businesses that were negatively impacted by the coronavirus pandemic.
The Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venue Act was passed as a part of the Consolidated Appropriations Act of 2021 in December 2020.
This Act allows qualifying small businesses to receive a second draw from the PPP through $285 billion of additional funding.
For businesses that use the funds for qualified payroll and operating expenses, the loans can be completely forgivable. Any amount that must be repaid is subject to the following terms:
Borrowers have up to 10 months after the end of the covered expense period (8 or 24 weeks) to apply for forgiveness.
In order to qualify for the second round of PPP, a business must meet the following requirements:
The maximum loan amount was reduced from $10 million for the first draw to a $2 million limit for the second round.
60% of any funds received from PPP loans must be used for payroll costs. The remaining 40% of nonpayroll costs can include expenses such as:
In addition to the extended deadline, the Biden Administration made additional changes intended to help the smallest businesses.
For self-employed individuals who file Schedule C along with their 1040 tax return, these business owners may now use line 7 (gross receipts) rather than line 31 (net income) of their tax return when calculating the amount of loan which the business is eligible for. This is intended to help more small businesses qualify for assistance.
The Paycheck Protection Program has served as a much-needed lifeline for small businesses. The deadline extension will provide small businesses with additional time in order to secure funding.
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