Among the many provisions included in the Consolidated Appropriations Act, 2021 are small business loans and tax policies designed to provide much-needed relief due to the economic fallout from the COVID-19 pandemic.

As part of the relief package, Congress passed numerous changes to the Paycheck Protection Program (PPP), including reopening the application process for first-time borrowers and creating a “second draw” for qualified small businesses. Additionally, changes were made to the forgiveness process to ease the burden of forgiveness for certain borrowers. Similar to the first round of PPP, a business may be eligible for full forgiveness of these loans if proceeds are appropriately spent within a specified time period. Covered expenses have been expanded to include certain business expenditures, property damage, supplier costs, and worker protection costs.

In order to qualify for a “second draw” PPP loan, a business must have exhausted the proceeds of the first loan (if applicable), have fewer than 300 employees, and must have experienced at least a 25% decline in gross revenue for any quarter in 2020 as compared to the same quarter in 2019. The maximum loan amount is calculated as the average monthly payroll costs for the entity during the 12 month period to the loan or at the election of the borrower—the 2019 year multiplied by 2.5 (3.5 for employers in the accommodations and foodservice industry). Seasonal employers utilize average monthly payroll costs for 12 weeks of their choosing between February 15, 2019, and February 15, 2020. The maximum loan amount this round is $2 million. Further guidance is expected.

With many new changes going into effect, it’s crucial to understand exactly how this new legislation will affect you and your business. If you are in need of assistance understanding these recent changes made to the PPP, please reach out to your CRI advisor for further guidance relevant to your unique situation.