What You Need to Know about the New PPP Program

By Kathy Bazan, BRC Consultant

Each year, new car models debut, each with improvements on earlier models. Likewise, there are changes to the 2021 Paycheck Protection Program (PPP). If you are a small business owner, here is what you need to know.

When will PPP applications be accepted?

The second week of January 2021 is likely but check with your bank, local bank, credit union, or fintech (e.g., QuickBooks, Square).

Which entities will accept PPP applications?

Any SBA approved lender including:

  • Any federally insured depository institution (in English, a bank)
  • Any federally insured credit union
  • Any participating Farm Credit System institution.

In the first round of PPP last spring, small/local banks were the leaders. Bremer Bank (MN, WI, SD) approved so many loans that the states in which they operated granted more loans than more populous states. In the second round, fintechs such as QuickBooks and Square were the leading lenders.

What is the maximum amount?

$10,000,000

What is the maximum interest rate and maximum term?

4% and 10 years. (Call and find out what your bank or credit union charges.)

Can payments be deferred?

Yes—from six months to 1 year.

Who can apply?

A business entity operating before Feb. 15, 2020.This could be:

  • A corporation or LLC with less than 300 employees
  • A non-profit 501 (c ) 3 (e.g., a charity)
  • A non-profit 501 (c ) 6 (e.g., a Chamber of Commerce)
  • A sole proprietor
  • An independent contractor
  • Self-employed individuals (e.g., freelancers)

If you are self-employed and you can prove you have been furloughed, it may be easier for you to get unemployment—which you don’t have to pay back.

Do I need perfect credit?

The SBA asked lenders to relax their requirements in light of the pandemic so that as many people as possible could qualify for the PPP>

Is the PPP a forgivable loan? 

While the PPP is variation on the SBA’s very popular 7(a) loan because the PPP offers some forgiveness.

As the business owner, is my compensation forgiven?

Yes, if your compensation is under $100,000 per year, if you are on payroll, and if the business issues you a W-2.

If your compensation is over $100K, ask your lender if the portion of your compensation over this level OR if all your compensation is NOT forgivable.

Which business expenses are forgiven under the PPP?

These expenses incurred between Feb. 15 and June 30. 2021:

  • Compensation (e.g., salary, wage, commission, or similar, and payments of cash tips or their equivalents)
  • State and local taxes related to payroll
  • Group health insurance
  • Payment for vacation and/or leave (parental, family, medical, or sick leave)
  • Mortgage or rent
  • Utilities and other expenses.

What records should I keep for forgiveness?

  • Quarterly payroll tax returns (federal and state)
  • Payroll registers
  • Accounting records
  • Invoices, proof of payment statements, and receipts for rent, mortgage, and utilities.

Will I pay taxes on the forgiven amounts of the PPP?

No.

How can I get the PPP forgiven?

While we are sure that you can apply for forgiveness after June 30, we are not sure how you will submit your receipts, payroll register, invoices, etc. Stay tuned!

Kathy Bazan, Business Recovery Centers Consultant
BRCconsultant@tualatinchamber.com
Email to schedule a meeting via Zoom

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