New PPP Forgivable Loan Funds and Rules

Over the January 9-10, 2021 weekend, the Small Business Administration (SBA) released rules and information about new Paycheck Protection Program (PPP) funds, first draw and second draw opportunities, and rules surrounding forgiveness. These new rules could impact all chiropractic physicians and their opportunity to access financial assistance during the pandemic. In late 2020, Congress passed an omnibus bill that required the SBA to make these changes and added $284.5 billion in funding.

As a reminder, all of these loans require that the funds received must be used only to cover payroll costs (including benefits), mortgage interest, rent, utilities, worker protection costs related to COVID-19, uninsured property damage costs caused by looting or vandalism during 2020, and certain supplier costs and expenses for operations.

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Please review the following sections as they apply to your situation, including the significant changes to the previous rules listed at the end of this article:

I did NOT apply for the PPP in 2020

Although the original PPP application deadline was last August, the new changes reopen the application process for first-time borrowers on January 11, 2021. It allows businesses to apply if they have fewer than 500 employees (including sole proprietors and independent contractors). These are forgivable loans.

The vast majority of these loans are forgiven when borrowers meet the requirements. These loans are forgivable when you 1) maintain your employee and compensation levels, 2) spend the proceeds on the permitted expenses listed above, and 3) at least 60% of the proceeds are spent on payroll costs. These requirements must be met within an 8-24-week period (i.e., approximately 2-6 months).

You will be working with a bank in your area that will help you navigate the full process, including forgiveness. However, if you would like to see the application or more details, you can find them here.

These loans, if unforgiven, will be for 5 years at 1%, are deferred until forgiveness is granted or for 10 months from disbursement (whichever occurs first), have no fees, and do not require a personal guarantee.

The deadline for new applicants is March 31, 2021. However, the ICS would recommend that you begin the process as soon as possible, preferably today.

I received a PPP loan in 2020, but returned or refused some funds due to certain requirements

If you have not received loan forgiveness prior to December 27, 2020, you may be eligible to modify your original application and increase the previous amount of your loan. Please reach out to your lender to determine the process they will use for your specific situation.

I received a PPP loan and forgiveness in 2020 OR I can’t increase my previous loan amount

If you have previously received the maximum loan amount and/or your first PPP loan was forgiven, you may be eligible for a Second Draw PPP (PPP2). Borrowers must have previously received a PPP loan and only used them for the permitted expenses listed above, have no more than 300 employees, and can demonstrate at least a 25% reduction in gross receipts between comparable quarters from 2019 to 2020. Again, these are forgivable loans.

Similar to the first draw, these loans are eligible for forgiveness when borrowers meet the requirements. These loans are forgivable when you 1) maintain your employee and compensation levels as required for the First Draw PPP, 2) spend the proceeds on the permitted expenses, and 3) at least 60% of the proceeds are spent on payroll costs. These requirements must be met within an 8-24-week period (i.e., approximately 2-6 months).

If you meet the above requirements, you should reach out to your prior lender to work with them on PPP2. However, if you would like to see the application or more details, you can find them here.

The deadline for PPP2 applicants is March 31, 2021. However, the ICS would recommend that you begin the process as soon as possible, preferably today.

Important Changes to PPP (and PPP2)

There were several changes in the passed legislation that are important to note regarding the PPP and PPP2 rules:

• Forgiveness Form: Loans up to $150,000 can be forgiven with a simple one-page certification showing the number of employees retained, estimated amount spent on payroll, and the loan amount.
• EIDL Advances – EIDL advances are no longer deducted from PPP forgiveness amounts.
• Covered Period – As indicated above, the covered period can be selected between 8 and 24 weeks after loan disbursement.