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Help Clients Benefit from PPP-2 Loans

Mar 22, 2021, 3 Minute Read

The Paycheck Protection Program (PPP) was reopened on January 11, 2021 with updated eligibility requirements and the possibility of a second loan for the hardest-hit small businesses. The new guidelines make it easier for businesses to obtain a first-draw PPP loan and a second-draw PPP loan to be used for eligible payroll and non-payroll expenses, including technology. Software and cloud upgrades, for example, are recognized as critical expenses, potentially including payroll, HR, and HCM platforms to digitize operations and support touchless, mobile-friendly solutions.

The PPP loan application deadline is March 31, 2021.

PPP History

With the continued closures and operation restrictions, businesses have been forced to adapt and stretch resources to stay open. The good news, as of March 14, 2021, more than 7.8 million PPP loans had been approved, providing over $703 billion in relief. Unfortunately, lockdown and work-from-home measures brought about by COVID-19 have disproportionately affected small businesses – particularly in the leisure and hospitality sectors. And nearly a quarter of all small businesses (fewer than 500 employees), which employ roughly half of the country’s workforce, remain closed.

According to the Congressional Research Service, unemployment during the pandemic peaked in April 2020 at 14.8% and remained at a still-elevated 6.7% in December. With support from the Department of Treasury, the Small Business Association (SBA) originally began providing funds via the PPP program in March 2020 as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The Consolidated Appropriations Act of 2021 (CAA), signed into law in December 2020, provided an additional $284 billion in funding, referred to as PPP-2.

Technology and Digitization

With so much of the workforce working remotely and the need to limit in-person contact, organizations dramatically increased the speed of adoption of digital technologies and converted manual, paper-based procedures to digital – from timecards, submitting receipts for reimbursement, and manual paycheck delivery, to taking customer orders. What’s more, many of these changes will be long lasting. According to a new McKinsey Global Survey, companies have accelerated the digitization of their customer and supply-chain interactions and of their internal operations by three to four years. In fact, technology’s strategic importance has become a critical component of business, not just a source of cost efficiencies.

This digitization investment will keep companies agile so they can respond to crises as well as evolve customer and employee demands. Cloud solutions offer key benefits that are critical for small businesses — like scalability, flexibility, cost, innovation, maintenance, and security.

PPP Loans

PPP-2 funds can be used for both payroll and non-payroll expenses, including payroll costs, benefits, mortgage interest, rent, utilities, worker protection costs related to COVID-19, uninsured property damage costs caused by looting or vandalism in 2020, and certain supplier costs and expenses for operations, which includes payments for business software or cloud computing.

The following entities are eligible to apply for a First Draw PPP Loan through the latest wave of funding:

• Sole proprietors, independent contractors, and self-employed persons.
• Any small business that meets SBA’s size standards (either the industry size standard or the alternative size standard).
• Any business, 501(c)(3) non-profit organization, 501(c)(19) veterans organization, or tribal business (sec. 31(b)(2)(C) of the Small Business Act) with the greater of:
  • 500 employees.
  • That meets the SBA industry size standard if more than 500.
• Any business with a NAICS code that begins with 72 (Accommodations and Food Services) that has more than one physical location and employs less than 500 per location.

Second Draw PPP Loan Eligibility Requirements for Borrowers

• Previously received a First Draw PPP Loan and will or has used the full amount only for authorized uses;
• Has no more than 300 employees; and
• Can demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020.

Second Draw PPP Maximum Loan Amount

• For most borrowers, the maximum loan amount of a Second Draw PPP Loan is 2.5x average monthly 2019 or 2020 payroll costs up to $2 million.
• For borrowers in the Accommodation and Food Services sector, the maximum loan amount for a Second Draw PPP Loan is 3.5x average monthly 2019 or 2020 payroll costs up to $2 million.

Second Draw PPP Full Forgiveness Terms

Second Draw PPP Loans made to eligible borrowers qualify for full loan forgiveness if during the 8- to 24-week covered period following loan disbursement:

• Employee and compensation levels are maintained in the same manner as required for the First Draw PP loan;
• The loan proceeds are spent on payroll costs and other eligible expenses; and
• At least 60% of the proceeds are spent on payroll costs.

Next Steps

• Apply for a PPP-2 loan by March 31, 2021 through any existing SBA lender or through any federally insured deposit institution, federally insured credit union, eligible non-bank lender, or Farm Credit System institution that’s participating in the PPP. List of lenders.
• Stay up-to-date on changing state and federal legislation.
• Visit the SBA or Treasury websites for more information and details.
• Access Paylocity’s COVID-19 resources and product updates.

To learn more, check out the Paylocity website.

Contact Claremont at 800.696.4543 or info@claremontcompanies.com for assistance when you’re ready to enroll a group in a Paylocity plan.

Questions?
Contact your Claremont team at 800.696.4543 or info@claremontcompanies.com.