PPP 2.0 – application opening, what you need to know

SBA is reopening the Paycheck Protection Program (PPP) for First Draw Loans the week of January 11, 2021. Here is a summary of PPP 2.0. For additional details, application forms and FAQ, please refer to the SBA’s website https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program. Companies should check with their lenders on when they will begin accepting applications.


First Draw and Second Draw (companies that previously received a PPP loan) PPP Loans can be used to help fund payroll costs, including benefits. Funds can also be used to pay for 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. The program is open until March 31, 2021. At least $15 billion is being set aside for First Draw PPP loans and $25 billion set aside for Second Draw PPP loans to eligible borrowers with a maximum of 10 employees or for loans of $250,000 or less to eligible borrowers in low- or moderate-income neighborhoods. To promote access for smaller lenders and their customers, SBA will initially only accept loan applications from community financial institutions starting on January 11, 2021 for First Draw PPP loans and on January 13, 2021 for Second Draw PPP loans.

Forgiveness Terms

  • Covered period can be anywhere from 8 to 24 weeks following loan disbursement.
  • Forgiveness depends on maintaining employee and compensation levels, spending loan proceeds on payroll costs and eligible expenses and at least 60% of proceeds spent on payroll.

Who Can Apply?

  • Companies with 500 or fewer employees for First Draw PPP loans and 300 or fewer employees for Second Draw PPP loans.
  • First draw eligibility includes nonprofits, veterans’ organizations, self-employed individuals, sole proprietorships and independent contractors.
  • Companies applying for second draw must demonstrate a 25% reduction in gross receipts in the same quarters in 2019 and 2020.

How Much is the Loan Amount?

  • 2.5 times average monthly payroll costs up to $2 million for most eligible businesses.
  • 3.5 times average monthly payroll costs up to $2 million for eligible businesses in the accommodation and food service industries.

Here are lessons learned from some of CFO Connections’ clients from the first round of the PPP and our recommendations on how to better position for PPP 2.0.

  • Companies that worked with their CPAs received a diagnostic review of their loan applications, verification of the estimated loan proceeds, and coordination with their lenders during the application process.
  • Companies that maintained accurate and up-to-date financial information were able to breeze through the application process with ease and received their loan proceeds much sooner than others.
  • If you are applying for a First Draw PPP loan and feel that you are facing some accounting challenges in providing timely and accurate financial information, now is the time to engage a CPA to help you sort through the information so that you are able to take advantage of PPP 2.0.
  • If you are applying for a Second Draw PPP loan this time around, we recommend you begin compiling information on your quarterly gross receipts for 2019 and 2020 to determine whether your business is eligible.
  • Companies who applied for PPP loans last year have had to endure the ever-changing regulations surrounding the program. Most are currently applying for loan forgiveness with their lenders. Companies that work with their CPAs receive assistance in maximizing the amount of the loan being forgiven. This is achieved through ensuring the completeness of their forgiveness application, the proper documentation to submit and retain for their record, step by step guidance on completing the forgiveness application through the lenders’ online portals and most importantly, liaison with lenders on technical matters.

We have advised and assisted our clients on this program since the program opened last year. This pandemic has affected most of us in a significant way and we want to give back to our community by offering a complimentary 20-minute consultation on PPP 2.0. Please contact us for guidance that could help you reach a lifeline for your business.

President Trump is Throwing the COVID Relief Bill in Doubt by Asking Congress to Amend It

A day after Congress passed the $900 billion COVID relief bill, President Trump said that he wants Congress to increase the individual stimulus from $600 to $2,000, or he won’t sign the bill. Let’s take a look at the bill as it stands right now.

Paycheck Protection Program Round 2 (PPP2)

The $900 billion deal includes $284 billion for PPP2, which will reopen after closing in August. Much like the program’s first iteration, the aid will be in the form of forgivable loans to small firms, but there will be some key changes.

Who can apply?

Businesses, some nonprofit organizations, self-employed workers and independent contractors are among those eligible.

Existing PPP borrowers may apply for a second loan, provided they have 300 or fewer employees and can demonstrate they experienced a 25% reduction in gross receipts during a quarter in 2020 compared with the same quarter in 2019.

First-time PPP borrowers will be subject to the program’s original eligibility rules. The original PPP was generally open to businesses with up to 500 employees, and there was no requirement to demonstrate a revenue loss.

How much is a business eligible for?

The maximum for PPP2 loans is $2 million. Loan amounts will be based on an applicant’s payroll, consistent with the program’s first iteration.

Second-time PPP borrowers will generally be eligible to borrow an amount equal to 2½ times their average monthly payroll costs. A notable exception: Applicants in the accommodation and food services industries, as designated by the Small Business Administration, are eligible for loans that amount to 3½ times their average monthly payroll.

What are the forgiveness requirements?

Borrowers are still required to spend at least 60% of the funds on payroll to receive full forgiveness. The other 40% may be used on eligible costs, include certain mortgage expenses, rent and utility payments. The bill expands forgivable expenses to include expenditures for personal protective equipment and other gear to protect workers; supplier costs; operations expenditures, such as software; and property damage costs due to public disturbances during 2020.

The legislation also clarifies that businesses that received PPP loans may take tax deductions for the expenses covered by forgiven loans.

The bill provides a simplified forgiveness process for PPP loans under $150,000. These borrowers will need to complete a one-page certification attesting they complied with program requirements, along with providing other information. Previously, the SBA and the Treasury issued a two-page forgiveness form meant to simplify the process for borrowers with loans of up to $50,000.

Where do businesses apply?

PPP loans are backed by the SBA but issued by financial institutions, such as banks, credit unions, fintech companies and community lenders. Interested businesses should check to see if a lender is participating.

When will the program reopen?

The bill requires the SBA to establish regulations on small-business support no later than 10 days after the legislation is signed into law. It remains to be seen if the PPP will open as quickly as it did the first time. Congress passed the Cares Act, which created PPP, on March 27, and the program opened one week later.

An SBA representative said the agency and Treasury are committed to launching the next round of PPP as quickly as possible, “working expeditiously to identify changes to Program rules, forms, and processes as laid out in the legislative text, and to appropriately update guidance and systems for PPP lenders and borrowers.”

What about businesses that had trouble accessing the program the first time?

Smaller companies that didn’t have established relationships with banks struggled to access the program when it first opened. The new bill allocates $15 billion each to community lenders and small depository lenders to issue loans. The bill also earmarks a portion of the PPP funding for both first- and second-time borrowers with 10 or fewer employees and loans of less than $250,000 in low-income areas.

What other forms of small-business aid are available?

The legislation provides $15 billion for the SBA to make grants to hard-hit live venue operators, such as theaters and live performing arts organizations. It also provides $20 billion for advance grants for applicants to the SBA’s economic-injury disaster loan program.

Finally, the bill extends a provision that pays the principal and interest on behalf of borrowers that have certain SBA loans, such as 7(a) loans, the agency’s flagship loan offering. It also provides support for the 7(a) program by increasing the amount of the SBA’s guarantee for lenders.

Other provisions in the bill that affect businesses

Business meal deductions – extends the 100% deduction to 2021 and 2022.

Enhanced employee retention credit – extends through July 1, 2021 and increases the amount of the credit from 50% to 70% of wages paid up to $10,000 for any quarter and allowing businesses with PPP loan to claim the credit.

Charitable deductions for individuals and corporations – extends through 2021 the $300 above the line deduction for charitable contributions by individuals ($600 for married filing jointly). It also suspends the 50% limitation for individuals and increases the limitation for corporations from 10% to 25%.

Child tax credit – allows taxpayers to use the 2019 income determine the credit for 2020 tax year.

Flexible savings accounts – unused 2020 FSA balance can be rolled over to 2021 and unused 2021 balance can be rolled over to 2022.

Educator expense tax deductions – clarifies that personal protective equipment and disinfectants qualify for the $250 above the line deduction.

We are here to help you navigate through this new round of stimulus to help you get through this uncertain time. Please click here for a free consultation.

Financial Statements – Your Story Teller

As accountants, we know what balance sheet, income statement and the statement of cash flows are. We also know that we have responsibility for more than just the numbers. We also understand the story those numbers tell about the business. Financial statements are the primary means of communicating financial results to executives, stakeholders, and investors. So, we must take a deep dive into what’s behind the numbers.

Discrepancies and Expectations

Accountants must not only know their numbers but also how to present those numbers in a meaningful way that company leaders understand. That’s not an easy task. Management in various departments of a company may each paint a different picture for you about how the company is doing. However, you as the accountants may see a different reality through the numbers. What people tell may be different than what the numbers mean, and it’s our job to communicate what’s off course and how to correct it.

Your Financial Statement Arsenal

Our recent experience tells us that business owners typically have a pretty good idea on how the business is doing. When they see financial information that doesn’t match up with their expectations, they begin to doubt the reliability of the financial information. The first step to effective and meaningful financial reporting is to have accurate information. If a company is lacking accounting expertise, we at CFO Connections can act as the company’s outsourced controller to offer review and supervision of the accounting department.

Once a company is confident in the accuracy of its financial information, here’s what the business owner should review and why these statements and information are important.

  • Balance Sheet. What are the major assets and liabilities? Are there any items that may affect future profitability or cash flow? For example, are there long-term debt payments? Perhaps there are assets that will need to be replaced in the near future? A balance sheet also provides liquidity information and the company’s ability to obtain working capital.
  • Income Statement. Most business owners focus their attention on the income statement since it shows whether the company is profitable. Most business owners have a god pulse on the business and often time they form an expectation of what they believe the numbers would show. Comparing important line items such as revenue, gross margin, operating expenses and net profit to their expectation would identify discrepancies that may need corrective action.
  • Cash Flow Statement. Cash is king and it is the lifeblood of a business. When evaluating cash flows, it is often extremely helpful to compare a company’s historical cash flows over a period of time to projections. It will help you see if the company is swimming or sinking. In our recent experience, the company executives we talked to were especially interested in how the company spends its cash, from paying down debt, payroll, other operating expenses, or loaned to other related entities. We also found that business owners prefer a simpler presentation of cash flows information over the traditional GAAP basis cash flows statement.
  • Management Discussion and Analysis (MD&A). If a company has audited financials and is required to publicly publish its financial statements, the MD&A would reveal historical insights or future impacts that may not have been included in your executive discussions.
  • Budgets. Does your company have a budget? With an unusual year we’ve had, it is particularly important to plan your next year taking into account some of the lessons learned this year. Afterall, your business may never be the same and that means taking a fresh approach in budgeting for the future. If your business has a budget, is it communicated and followed? Budgets provide needed structure and discipline, so engaging top-down support for company-wide compliance is extremely crucial. Comparing budget-to-actuals show where resources may be leaking.

Communication is Key

At CFO Connections, we are your strategic partner. We’re in a unique position to provide information that guides the trajectory of the business. We will customize any reports that meet your needs. We are also educators who will tell the story behind the numbers, correlating operational and financial performance. We’re part detective, part educator, and 100% strategist. Contact Us so we can help make sense of your numbers for you.

What is Going On with the PPP Loan Forgiveness Process?

If getting a PPP loan approved meant you had to move at warp speed, getting one forgiven may well feel like you’re stuck in slow motion. Let’s take a look at what’s been going on in the forgiveness process, how the current and potential legislatures could impact forgiveness and taxes, and tips from lenders that would help you sail through that forgiveness process without a hitch!

How many businesses have applied for forgiveness already?

Since launching an online portal for loan forgiveness in early August, the SBA has received more than 96,000 applications from businesses seeking to have their loans forgiven but none had been approved. These applications represent about 2% of the 5.2 million loans, worth $525 billion, according to data from the SBA. It also could take the SBA as long as 90 days before the agency needs to remit anything to the lender. And the lender, filing the forgiveness application on behalf of the borrower, has 60 days before it needs to submit anything to the SBA. The good news is that a Treasury Department spokesperson said that the processing of the forgiveness applications is anticipated to begin this week.

What’s going on in the legislature?

Lawmakers in the House and the Senate have introduced legislation to streamline forgiveness for PPP loans less than $150,000, granting blanket forgiveness to businesses with a simple attestation that the funds were used in accordance with guidelines. Banks and small business advocacy groups are pushing the legislation, over concerns that the process is too complicated for small businesses.

In addition, Congress also is considering an additional round of PPP funding for hardest hit businesses. Businesses that have already used up their PPP funding might get a second chance for money from the program.

How does the PPP loan forgiveness impact taxes?

Under the program, any loan forgiveness would be excluded from the borrower’s taxable income. The Internal Revenue Service published IRS Notice 2020-32, denying a borrower’s ability to deduct the same expenses that qualify for the loan forgiveness. Since Congress intended for the loan forgiveness under the program to be tax-free, this IRS Notice reverses that position and eliminates any benefit intended from the program. The American Institute of Certified Public Accountants and other industry groups have written a letter to Congress to urge Congress to reverse the IRS Notice because it goes against the intention of the CARES Act. Congress is currently addressing this issue.

Tips from Banks on Applying for Forgiveness

  1. Since the forgiveness application opened up in early August, many banks have implemented technology solutions to assist businesses to manage their forgiveness applications. Banks have been taking their time getting set up to avoid being crushed by applications, as they were during the initial launch of the program. They want to make sure all the IT bugs are worked out.
  2. If your bank provides a spreadsheet template to help you track the PPP loan disbursements, it is important to review the results of the spreadsheet to make sure that it reflects the intended forgiveness of the loan. Banks strongly advise businesses to engage a CPA to review the calculation as often times spreadsheets have limitations and do not address all nuances of the PPP loan legislations.
  3. The biggest hurdles so far appear to be the supporting documentations that are required to be submitted to the banks for forgiveness. Some businesses are not submitting the correct documents (especially if a business used the loan proceeds to pay certain non-payroll costs, e.g. utilities, interest, rent, etc.), or not reconciling the differences amount various documents for the same period. Banks strongly recommend that businesses engage a CPA to assist with gathering the documents and reconciling these differences.
  4. Businesses should ensure that salary for owner employee is calculated correctly in the forgiveness application. The latest interim final rules define owner employee as having at least a 5% ownership in a business. This is important because the salary for an owner employee is limited to an annual amount of $100,000 for purposes of forgiveness. Any salary paid in excess of the $100,000 annual amount is not forgivable. This threshold applies in aggregate across multiple businesses owned by that same owner employee, i.e. the multiple businesses have a combined limitation of $100,000 annual salary. However, each business has the freedom to allocate this threshold among the multiple businesses.
  5. The most recent rules also relaxed the requirement on how the loan proceeds should be spent. Previously, 75% of the loan proceeds must be spent on payroll related costs and the remaining 25% spent on other eligible non-payroll costs in order to achieve full forgiveness. Now, a 60/40 split will achieve the same result.

At CFO Connections, we stay on top of the PPP loan forgiveness requirements and any current developments that may affect businesses on achieving maximum forgiveness. We are familiar with the technology platforms and the documentations needed as part of the application process. We can help you with presenting and reconciling the disbursements and gathering the documents so that you can focus on serving your customers. Please Contact Us.

The Moving Target of the PPP Loan Forgiveness

The SBA opened the forgiveness application submission on August 10. Almost immediately, we see various financial institutions notifying their customers that they would not begin accepting forgiveness application, anticipating more changes from the SBA. When Congress is back in session, they are going to vote on an even simpler one-page forgiveness application for loans less than $150,000. So stay tuned if this affects your company.

We’ve taken a look at the latest and greatest and summarized answers to those FAQs that are of the most concerned to business owners. If you are interested in reading the complete FAQs published by the treasury, here is the link.


The 5% rule – you have to own at least 5% of the business in order to be consider an owner-employee of a C or S corporation. This is important because payroll costs for an owner is limited to $100,000 a year. This rule does not apply to partners, or LLC members where the LLC is taxed as a partnership.

Payroll costs – health insurance premiums – the new FAQ clarifies that only the portion of the premiums paid by the company is eligible for forgiveness. That means that if a company pays 80% of the health insurance and employees pay the other 20% pre-tax or after tax, only 80% of the health insurance premium is eligible for forgiveness. The rule also allows vision and dental insurance to be included as payroll costs.

Making payments on your loan – companies have 10 months from the covered period to submit the forgiveness application. Companies are not required to make any payments until forgiveness is determined. Interest started accruing at the time when the loan proceeds disbursed and companies are responsible for accrued interest related to the unforgiven portion of the loan, in addition to the principle of the loan that is not forgiven. Once application is submitted to the bank, the bank has 30 – 60 days to review.

EIDL loan advance – the SBA will reduce a company’s loan forgiveness amount by the amount of the EIDL advance it received. On the forgiveness application, it is required that a company indicates the amount of the EIDL advance it received. Therefore, if a company received an EIDL loan advance in excess of the amount of the PPP loan, it would not receive any forgiveness on the PPP loan and must repay the PPP loan prior to the maturity date.

Non-payroll costs – rent to related party – rent to a related party (defined as parties with common ownership) is eligible for forgiveness if (1) the lease was entered into prior to February 15, 2020 and (2) the rent amount is no more than the mortgage interest owed on the property during the covered period.

Non-payroll costs – rent and sublease – a company that rents but also subleases its space is only eligible to apply the difference (i.e. rent paid less rent received from sublease) for forgiveness.

Non-payroll costs – mortgage interest and sublease – a company that has a mortgage on a real property that also leases out space to other businesses is eligible to apply the portion of the mortgage interest attributable to its own utilization for forgiveness. For example, if 60% of the fair market value of the property is rented to other businesses, the company can only claim 40% of the mortgage interest paid.

We know that it could be overwhelming for businesses to try to rebuild their businesses while navigating through a moving target to obtain maximum forgiveness. We are here to provide some calmness in a sea of chaos and ready to assist you to improve your cash flows and help you stay in compliance with the Paycheck Protection Program. Please Contact Us for a complimentary consultation.

The SBA Released Updated PPP Loan Forgiveness Application Forms

The Small Business Administration last week issued a new Interim Final Rule on PPP loan forgiveness and provided two new Loan Forgiveness Applications.  For the most part, these new publications implement the changes made by the PPP Flexibility Act.

Company can use the EZ form if they meet one of the followings:

  1. Self-employed individuals, independent contractors or sole proprietors with no employees at the time of the loan application.
  2. Did not reduce annual salary or hourly wages of any employee by more than 25% AND did not reduce the number of employees or the average paid hours of employees.
  3. Did not reduce annual salary or hourly wages of any employee by more than 25% AND the company was unable to operate at the same level of business activity as before due to compliance with requirements established related to the maintenance of standards of sanitation, social distancing, or any other work or customer safety requirements related to COVID-19.

Companies that do not meet any one of these requirements must use the long form to apply for forgiveness.

Here is the EZ form and its instructions.

Here is the long form and its instructions.

The interim final rules were also updated to reflect the recent changes. Click here for a copy.

Remember that the Paycheck Protection Flexibility Act was signed into law on June 5, 2020 and it afforded greater flexibility to businesses on the length of time and how to use the PPP loan proceeds. For a refresher of what those changes are, click here.

If the goal of the business owner is to maximize forgiveness, it is imperative that they work closely with their CPAs and lenders to ensure that the application is completed appropriately and that they have the proper documentations to support the application. The devil is in the details. We have been key partners with our clients in this process, from loan application to how to properly disburse loan proceeds to accumulating supporting documentations along the way. We are ready to help businesses navigate this constantly changing landscape. Contact us if you would like to achieve your goal.

Sweeping Changes to PPP Legislature

The U.S. Senate passed the House version of Paycheck Protection Program (PPP) legislation last night, tripling the time allotted for small businesses and other PPP loan recipients to spend the funds and still qualify for forgiveness of the loans. The adopted legislation provides desperately-needed flexibility and relief to countless small businesses. It gives small businesses a more realistic timeline to get the help they need while they bring back employees.

The Senate approval sends the House bill, called the Paycheck Protection Flexibility Act, to President Donald Trump, who is expected to sign it.

Here is a summary of the legislation’s main points: 

  • PPP borrowers can choose to extend the eight-week period to 24 weeks, or they can keep the original eight-week period. This flexibility is designed to make it easier for more borrowers to reach full, or almost full, forgiveness.
  • The payroll expenditure requirement drops to 60% from 75%. However, borrowers must spend at least 60% on payroll or none of the loan will be forgiven. Currently, a borrower is required to reduce the amount eligible for forgiveness if less than 75% of eligible funds are used for payroll costs, but forgiveness isn’t eliminated if the 75% threshold isn’t met.
  • Borrowers can use the 24-week period to restore their workforce levels and wages to the pre-pandemic levels required for full forgiveness. This must be done by Dec. 31, extended from the previous deadline of June 30.
  • The legislation includes two new exceptions allowing borrowers to achieve full PPP loan forgiveness even if they don’t fully restore their workforce. Previous guidance already allowed borrowers to exclude from those calculations employees who turned down good faith offers to be rehired at the same hours and wages as before the pandemic. The new bill allows borrowers to adjust because they could not find qualified employees or were unable to restore business operations to Feb. 15, 2020, levels due to COVID-19 related operating restrictions.
  • Loan term has been extended from 2 years to 5 years. The interest rate remains at 1%.
  • The bill allows businesses that took a PPP loan to also delay payment of their payroll taxes, which was prohibited under the CARES Act.

Our observations and recommendations:

  • For most businesses who received the loan in April or May, the extension to the 24 weeks will bring them to October or November, respectively.
  • If your business is not yet reopened and you have not spent the PPP funds, you now have the opportunity to utilize the funds for payroll when you reopen within the 24 weeks period.
  • For those businesses that end up with a loan, the extended loan term will reduce monthly payment amount.
  • Delayed payment of payroll taxes will ease cash flows concerns for some business owners. However, at the present time, it is unclear as to when the deferment deadline would be. We’ll keep you posted as more details emerge.
  • We recommend that businesses continue to disburse their PPP loan proceeds based on the new legislature.
  • We recommend that business owners and finance professional to hold off on completing the current forgiveness application form as we are expecting changes to the application form based on this new legislation.

CFO Connections is here standing by to help you navigate through the PPP landscape so that you can focus on reopening and rebuilding your business. We offer complimentary financial health assessment and deferred payment plan for businesses that have been negatively impacted by the COVID-19 pandemic. Contact us here.

PPP Forgiveness Guidance Update

Now that most businesses have applied and received their PPP funds, the next step for them would be to apply for forgiveness. The SBA released a forgiveness application form on May 15, 2020 and also clarified some of its existing guidance. For a copy of the application form, click here. Here is a recap and what you need to know in a nutshell.

Covered Period/Alternative Payroll Covered Period – while most accountants had hoped that the SBA would defer to a cash method of accounting, the SBA provided an alternative on counting the 8 weeks period based on costs incurred, not paid. At the end of the day, regardless of which method you choose, as long as a company sticks to a consistent method on ALL eligible expenses and pays out ALL eligible costs, it would be considered appropriately spending the funds in the 8 weeks period.

Payroll costs – The requirement that 75% be used for payroll costs (and no more than 25% for eligible non-payroll costs) remains in place. However, the calculation is not based upon 75% of the total PPP loan amount received.  Rather, it requires that at least 75% of the amount of forgiveness must be used for payroll costs (i.e., divide the total payroll costs by .75).  This may surprise some businesses. If a business does not wish to end up with a loan, i.e. a portion of the proceeds remains unforgiven, it should immediately consult with a CPA to ensure the end goal will be achieved.

Mortgage interest – the SBA clarified that mortgage interest on both real and personal (e.g. equipment) properties are considered eligible expenses.

Utilities – qualified utilities expenses include electric, gas, water, transportation, internet service, telephone.

Rent – on real and personal property.

Salary reduction and head count reduction safe harbor – forgiveness will depend on whether a company reduced its head count or salary level during the covered period (or alternative payroll covered period) but the rules also provide for exemptions under certain situations.

Certification – the SBA will rely on a company’s certification for loan amount less than $2 million and take it at face value that the company needed the loan as a result of COVID-19 and will not audit these loans.

Deadline – the application form does not specify a deadline. Some financial institutions are taking the approach that since the remaining loan is on a 2-year term, companies will have 2 years to apply for forgiveness.

BOTTOM LINE: The application form and its related guidance is very fluid and will continue to change or be clarified by the SBA in the coming weeks. At the present time, companies should focus more on making sure that funds are disbursed for allowable purposes and periods and accumulate supporting documents (some must be submitted to the lenders with the application form and some to be maintained by the companies) as they pay these expenses. Companies should continue its dialogue with their lenders and CPAs to ensure that compliance and their intended goals are met. We have familiarized ourselves with the PPP and would be able to help companies to navigate the forgiveness process. Contact us now.

What to Expect from the Second Round of the Federal Stimulus Package Funding?

The first round of the $350 billion opened for application on April 3 and in less than 2 weeks, the SBA announced that it was unable to process additional applications from small businesses because funding has lapsed. The second round of the PPP funding of $484 billion is expected to hit the President’s desk for his signature this week. This second round of funding is expected to replenish the PPP and the EIDL loans. After the first round of funding, here is what we heard and what we can expect from the second round.

What Happened in Round 1?

  1. 74.03% of all approved PPP loans in the US were $150k and Under

2. 0.27% of all approved PPP loans in the US were over $5M

3. Over 95% of all loans approved under the PPP loan program were $1M and less

Despite the statistics, some large companies with liquidity also received the PPP loan and a few had to return the loan amid public pressure, such as the fast food hamburger joint Shake Shack.

Community banks came through for small businesses during the first round of the PPP funding since they are a bit smaller but more nimble. Large financial institutions such as Bank of America, Wells Fargo, JP Morgan, among others, have been accused of prioritizing larger loans and shutting out smaller businesses from getting the much needed financial relief.

When it came to processing PPP loan applications, banks were making their own rules, with some accepting the standard SBA application form and the certifications on the form, some required additional certifications from business owners, some wanted owners to certify that they did not or would not apply for the EIDL loans, etc. Some not only required businesses to be existing clients, but also added requirements such as certain types of accounts or a credit relationship.

The SBA originally set out to provide a maximum $50,000 EIDL loan with a $10,000 immediate advance to small businesses but due to funding drying up faster than expected, it revised its approach to providing only a $15,000 EIDL loan with a $1,000 advance.

What to Expect from Round 2?

Round 2 will allocate around $60 billion of PPP funds to smaller financial institutions which is good news for smaller businesses. We expect to see banks continue to supplement the standard application and required documentations with their own required certifications or require additional documents, depending on each of their own risk evaluation.

Since the first round of funding has been exhausted, small businesses who submitted their applications but did not receive funding from the first round should contact their banks to understand whether their application will be put in a queue for the second round of funding. This does not necessary mean though you are guaranteed funding by your bank. It all depends on how quickly your application is being submitted. It is estimated that the second round of funding could run out in 48 hours once the application process opens. If you are one of those businesses, our recommendation is to stay in close contact with your banks. Since bankers are busy processing applications, most of them are not answering their phones. E-mails would be the best way to communicate.

For independent contractors and self-employed individuals – you also qualify for PPP if you meet the requirement. The recommendation for these individuals would be in line with those for small businesses – continue to stay in contact with your banks and inquire about the status of your application.

If you’ve already applied for the SBA’s EIDL loan during the first round and did not receive funding, you should not need to reapply since the SBA will continue to process applications that are already in its system.

CFO Connections success stories: Clients who sought our help in preparing their PPP applications, computing the amount of the loan, and receiving advice on the appropriate documents to include with their applications, were able to secure the funding they needed during the first round with no adjustment by their banks on the requested loan amounts. We have a 100% success rate. Contact us for assistance with your funding needs.

Coronavirus Resources for Businesses and Taxpayers

While our minds are occupied by this pandemic, I hope that you find the following resources helpful in getting through your businesses during this critical time.

IRS extends tax filing and payment deadline to July 15 as COVID-19 spreads

SEC Provides Conditional Regulatory Relief and Assistance for Companies Affected by the Coronavirus Disease 2019 (COVID-19)

The Florida Small Business Emergency Bridge Loan Program is currently available to small business owners located in all Florida counties statewide that experienced economic damage as a result of COVID-19.

SBA to Provide Disaster Assistance Loans for Small Businesses Impacted by Coronavirus (COVID-19)

The Families First Coronavirus Response Act: What It Does For Employees Who Need Paid Sick Leave

Florida Governor Ron DeSantis has announced the activation of the Business Damage Assessment Survey to assess the impact of the COVID-19 coronavirus on Florida’s local businesses, including those in Hillsborough County.  If you are a business impacted by the COVID-19, it is critical that you take the time to complete this survey. 

What you need to know about COVID-19, resources for the community, information for healthcare professionals, and latest updates

What to do if you suspect you contracted the disease, resource toolkit from the Florida Department of Health

FAQs, latest updates, local resources, and more