Ah, the PPP. We thought our daily struggle with you last summer was as challenging as it would get. How naïve we were!

Lots of changes to the program have occurred as of late — all to the theoretical benefit of borrowers, though in practice not as welcome as one might expect.

Here’s a summary:

1) Schedule C filers (self-employed, independent contractors, freelancers, most single-member LLCs, and others) may now — moving forward — use a new calculation that is more advantageous when calculating the loan amount. The total loan is now based on 2.5 (or 3.5 if in hospitality) months of gross income (Line 7) rather than net income (Line 31).

Per the AICPA, “if a Schedule C filer has employees, the borrower may elect to calculate the owner compensation share of its payroll costs based on either net profit or gross income minus expenses reported on lines 14 (employee benefit programs), 19 (pension and profit-sharing plans), and 26 (wages (less employment credits)) of Schedule C. If a Schedule C filer has no employees, the borrower may simply choose to calculate its loan amount based on either net profit or gross income.”

This is indeed excellent news, but a) why this didn’t get applied to partnerships as well — which are entities following the same concept as Schedule C filers, only with more than one owner — is totally illogical; and, b) this is a slap in the face to the many millions of PPP borrowers who got practically nothing under the old rules and are now bound to them, as this new rule is not retroactive. AICPA has issued a statement about the inherent unfairness, calling on Congress to correct it.

Furthermore, many lenders have not bothered to re-program their systems with the new rules, as the program is slated to close by March 31 (see below re: pending extension).

2) The safe harbor for the “good faith loan necessity certification” for First Draw loans using the new Schedule C calculation is reduced from $2M to $150,000. If your loan is in this range, carefully consider which calculation you wish to use and weigh the difference against the risks.

3) Businesses that receive a first- or second-draw PPP loan after Dec. 27, 2020, may now also receive a Shuttered Venue Operators Grant (SVOG), with the proceeds from the PPP loan subtracted from the amount of the SVOG. Venue operators do not have to subtract any PPP funding received before Dec. 27, 2020. (More here.)

4) Many more non-profits are eligible for PPP loans than in previous iterations of the program, as well as internet-only news and periodical publishers. (More here.)

5) Costs eligible for loan forgiveness in the revised PPP include payroll, rent, covered mortgage interest, and utilities, as well as these types:

• Covered worker protection and facility modification expenditures, including PPE, to comply with COVID-19 federal health & safety guidelines.
• Covered property damage costs related to property damage and vandalism or looting due to public disturbances in 2020 that were not covered by insurance.
• Expenditures to suppliers that are essential at the time of purchase to the recipient’s current operations.
• Covered operating expenditures, which refer to payments for any business software or cloud computing service that facilitates business operations; product or service delivery; the processing, payment, or tracking of payroll expenses; human resources; sales and billing functions; or accounting or tracking of supplies, inventory, records, and expenses.

6) To be eligible for full loan forgiveness, PPP borrowers will have to spend no less than 60% of the funds on payroll over a covered period between eight and 24 weeks’ long (no longer either/or, but any period in-between).

7) Improvements in the PPP have unfortunately led to slowdowns. Though the program is now more focused on and directed toward helping the struggling businesses who need it most — smaller ones, minority- and women-owned, hospitality industry, etc. — it’s been handled in a haphazard way that has confused applicants and lenders alike. And safeguards put in place by the SBA to combat fraud had the unwelcome consequence of holding up millions of valid applications.

8) There is legislation currently pending to extend the current PPP round’s deadline to May 31, but that has not yet been approved. The House voted almost unanimously to extend, but the Senate has not yet acted. Unless they act soon, this week will be the last in which to submit applications.

9) The program our firm uses — AICPA’s CPA Loan Portal — as well as many others, is already closed to new applicants as well as the public, and one must go through a validated partner firm such as ours in order to apply. However, I have heard that Cross River Bank (my favorite lender from the first round) is still accepting applications. Their FAQ, as well as their list of required documents by entity type, are both quality-information and well-organized. Please read those sections before applying. I have recently been informed that Lendio is also still accepting applications. (These are not affiliate links; I do not earn anything for referrals.)

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