PPP Round 2: Everything Businesses Need To Know
An update from PN Lawyers on the current differences between the Paycheck Protection Programs (PPP and PPP 2), including special provisions for the restaurant and hospitality industry.
After months of congressional delays and negotiations, on December 21st, Congress passed a new COVID-19 relief bill titled "Consolidated Appropriations Act, 2021.”
On Sunday, December 27th, President Trump signed the new bill which provides a second round of the Paycheck Protection Program (PPP) due to the pandemic.
Some key highlights of PPP #2 include:
- Borrowers can receive up to 2.5 times their average monthly payrolls costs.
- Same as the first round, but capped at 2 million dollars this time.
- Borrowers may elect either an 8 or 24 week period in which to apply their PPP #2.
- Second time borrowers must have used their first loan in full and must demonstrate a 25% decline in any matching quarter between 2019 & 2020.
- PPP #2 will also apply to sole proprietors and independent contractors as well as individuals who own or operate their own business.
Borrowers are still required to use at least 60% of the PPP #2 money they receive on payroll. However there are many new expanded categories for the remaining 40%.
New legislation has expanded the allowable expenses and the allowable forgivable expenses from the first round. Some of these new expenses include money spent on:
- Rent & mortgage
- Utilities & supplier costs
- Operating costs including software, cloud computing, and accounting
- Property damage
- If your property or your business was damaged during the initial shutdowns of Covid-19, you can now use PPP #2 money to pay for the repair of that property.
- Personal protective equipment (PPE) for your employees, staff, or for the office are also expenses that are permitted under PPP #2.
Again all of these expenses are allowable, but you must still spend the first 60% on payroll before you can spend the remaining 40% on these permitted new expenses.
I already have a PPP loan. Am I entitled to PPP #2 or a second draw?
The answer is YES. You may receive PPP #2 even if you received PPP #1, with some exceptions of course.
- You must have spent all of your PPP #1 money.
- Your business must have less than 300 employees and must be able to show a 25% gross revenue loss in any quarter matching between 2019 and 2020.
- You may borrow up to 2.5 times your payroll for any given month, however you will be capped at $2 million regardless of who you are.
Is there any specific or special relief for restaurants, bars, live venues, and the hospitality industry?
Yes. There is some additional relief for those in the restaurant, bar, nightclub, live venue, and hospitality industry in general. Although it probably will not go to go far enough, especially for those small businesses that we represent here in NYC, there is some silver lining to the PPP #2.
They have focused in and given additional benefits to those in the restaurant and hospitality industries.
What's different for restaurants & the hospitality industry? Are they allowed to receive more money? Do they have more benefits in PPP #2?
The answer is YES. In PPP #2 there is a major difference for food service providers and those in the restaurant, bar, nightclub, and hospitality industry. Under section 311 of the act, there is something called a NAICS code section 72. Section 72 borrowers, those in food and hospitality, are entitled to receive up to 3.5 times their monthly payroll average.
As opposed to all regular businesses, who are receiving 2.5 times their average monthly payroll, those in food and hospitality can receive 3.5 times their monthly payroll, which is 40% more than the average PPP #2 borrower. This is definitely going to be a little bit of an extra bump to the hospitality and restaurant industry, which is much needed.
A short list of hospitality PPP #2 borrowers who will be eligible for 3.5 times their monthly payroll (under Code NAICS 72) are:
- Caterers both with catering halls and corporate caterers or people who are doing catering delivery services
- Bed and breakfasts
That's what we know about PPP #2 and the second draw for now. We will be providing updates here on our blog as more information becomes available.
If you have any questions, we're available 24/7. Give us a call at: 212-213-8511