Episode 39: Paycheck Protection Program (PPP) Second Dra‪w

Episode 39: Paycheck Protection Program (PPP) Second Dra‪w

Do you get that extra months of payroll as part of your PPP loan? 

Susanne Mariga:Welcome to the Profit Talk Show. In this show, we’re going to explore strategies to help you maximize profits in your business while scaling and creating the lifestyle that you want as an entrepreneur. I am your host, Susanne Mariga. I am a Certified Public Accountant, a Certified Profit First Professional, and a Certified Tax Coach. Today, we’re going to talk about strategies to help you maximize profits in your business. 
Good morning, Profit First Entrepreneurs and Thought Leaders. Today, we’re going to talk about the PPP loan and particularly the second draw of the PPP loans. Now, before I begin, I just want to go over some quick housekeeping items. We are offering another Profit First Masterclass. It is starting this month, February 22nd. This class is going to go for an entire week, and we’re going to be teaching you the ends and outs of Profit First, and we’re going to do this because we want to help you make 2021 your best year ever. Now, this class is going to start every single day at noon for about an hour each day. We try to keep it short and succinct because we know you guys are super busy entrepreneurs, and we want to pack it with really great filled information. 
That’s really going to help propel your business forward in a very succinct way. So, definitely check us out. If you are not part of our Profit First Masterclass, definitely make sure that you join us. You can go ahead and search for us on Facebook, Profit First Master Class with Susanne Mariga, in order to sign up for the Profit First Masterclass. You don’t want to miss this. And, today, I want to talk more about the PPP loan and specifically the second tranche of PPP loan. Most of you guys are aware prior to the end of 2020 that we had a little bit of light at the end of the tunnel. On December 27th, Congress and the President got together and they signed a new act which allowed for us to get a second draw of the PPP loan.  
The SBA actually started accepting applications for this PPP loan about two weeks ago, January 13. Now, the provisions on this second PPP loan are going to be different than what was there on the first provision because this second PPP loan is really set aside to help business owners that have undergone some type of financial loss they’ve experienced because of this Covid19 Pandemic. The second draw does have some new provisions that were not in the original PPP loan. However, if you did not get an original PPP loan, you missed it, or you decided against it originally, you now have the opportunity to go ahead and apply for your original PPP loan, too. So, if you did not get an original PPP loan last year in 2020, this is your opportunity to jump on board and get that PPP loan. This is going to be very relevant to you. You’re going to be under the original requirements. If you want to learn more about the original requirements, we’ve done tons of videos about those. 
Please go ahead and make sure you check those out, and you will definitely be able to learn about the original PPP loans. Now, the second loan of PPP loans can be used to fund your payroll costs, and this also includes benefits. If you provide health insurance for your employees, you’re going to be able to use a second PPP loan in order to obtain and pay for the health insurance and the payroll for your employees. You can also use this PPP money for your mortgage entering your rent and utilities, the same as the original PPP loan. In addition to that, there are some other things that you can use a PPP loan for. You can use it for your worker protection cost that’s related to COVID-19 like if you have to provide masks or plexiglass for your employees, you’re going to be able to use your PPP money for that.
If you’ve had uninsured property damage, like you were a victim of the looting and vandalism that happened in 2020, and you want to make some repairs, you can use your PPP loan for that, and also for certain supplier costs and expenses for operations. I’m going to go in a little bit more detail. This is just to be able to prepare you a little bit more so that we can help you stay in compliance. When I say certain supplier costs or expenditure, what we’re talking about is, if you need it for certain purchases before you get the second PPP loan. 
Now, when I say cover operating expenditures, it’s very specific as to what it’s covering. It’s looking for your software. It’s looking for your calc competing services. That software is needed to facilitate your business operations, your products, or delivery, your merchant services, or be able to run a payroll, your human resources, your sales or billing functions, your accounting, to be able to track those purchases for your supplies, your inventory, your records, or any other expenses. If you had to have software, either in the cloud or even locally based software, in order to run your operations, you can use your PPP money for that. It also covers your covered worker protection expenditure. These are things that you’ve had to purchase in order to comply with the department of health and human services, your center for disease control, your occupational safety and health administration. 
This includes things like if you had to install plexiglass, drive-through windows,  change your air pressure, ventilation, put up physical barriers, so people would not breathe on each other if you had to make some expansions in order to socially distance, or purchase equipment to keep your employees safe, or your customers safe in order to comply with the CDC guidelines, you are able to use your PPP money in order to protect yourself and your employees. A full forgiveness is a paycheck protection program which means you have to still spend the majority of the funds on the payroll. You’re required to spend at least 60% of the loan proceeds on payroll costs. 
These payroll costs can be incurred between either an eight-week period or a 24-week period. Now, for most of you guys, I’m going to recommend that you’re going to consider using the 24-week cover period because it’s going to give you more time to use more of the funds. Most of you guys will be able to exhaust it all on payroll expenses considering that you do get two and a half times among payroll expenses. Now, the maximum amount that you can borrow for most of you guys is going to be two and a half times your average monthly payroll cost. 
That can either be 2019 or 2020. So, if your payroll costs were actually higher in 2019, you want to make sure you use that or vice versa if it was higher in 2020. It just gives you more spending opportunities for the PPP loan, and the maximum PPP loan that you can get is two million dollars if you’re in an industry that was hit particularly hard. I’m going to talk about the accommodation industry or the foodservice. If we’re in the hotel industry, we actually have been hit harder by COVID-19. It must be right because the travel industry just has not yet rebounded because of all the travel restrictions. In restaurants, we can’t even sit down and eat together. So, Congress and the President recognized us. What they’ve done is, instead of two and a half times your monthly average payroll cost, you can go ahead and take through three and a half times your monthly average cost for either 2019 or 2020. 
Again, you can get up to $2 million, you get that extra months payroll as part of your PPP loan. That’s really great. So, let’s talk about who qualifies for the second round of PPP loans. And again, it’s different from the original loan.  It’s more restrictive because we want to make sure that it’s helping those who really have had a financial impact due to COVID 19. In order to, first of all, get a second round of PPP loans, you had to do this leap. Obviously, you had to be issued a first draft of a PPP loan, and you had to have it already, but if you’ve not gotten the original PPP loan, this is your opportunity to go ahead and apply. 
You also have to have less than 300 employees. So, if you’ve got more than 300 employees, you’re not going to qualify for this. If you have less than 300 employees, and you also have to demonstrate financial need, what that means is that you have had to have a twenty-five percent reduction when you compare any quarter in 2020 versus the same quarter in 2019. Now, as a timeline, if you are applying for the second tranche of PPP, you must apply by March 31st, 2021. At the time that we’re recording this podcast, you got almost two months in order to apply for a PPP loan. Now you have to apply through your bank or through an SBA loan approved bank. I’m going to leave in the show notes the link to the SBA site where, if you’re not sure who’s offering PPP loans, you’ll be able to click on that link and find a bank in your local area that is offering PPP loans. 
When we have seen our clients apply for PPP loans, what we’re typically seeing is that the banks are asking for copies of their financial statements. What they’re particularly looking for is that specific quarter, where you have experienced a 25% reduction in revenue. So, they’re looking for the profit and loss statement for that particular quarter and they’re looking for the comparative quarter equivalent in the year before where you can actually demonstrate that, that has been happening for you. Now, the actual law says that you don’t have to give it until the time that you are forgiven. However, most things are going ahead and asking for it upfront because they don’t want to get in trouble later on. If you’ve got a real need for it, let’s go ahead and show it right now. 
Let’s get it over with so that we can go ahead and apply for that. Now they’re also asking for payroll registers for 2020 and 2019, if you’re using the 2019 numbers, because they have to be able to calculate this two times monthly payroll at three times monthly payroll. If you’re in a restaurant, hotel industry, they’re asking for copies of the nine forties and nine forty ones because they want to make sure that they’re in compliance, that they are actually matching these registers. Now, if you’re a sole proprietor or a single member, LLC, you don’t necessarily have employees asking for copies of tax returns. And if you’re a partnership, they’re asking for a copy of your 1065 in order to compute your monthly payroll. Now, a lot of times if you’re using the same bank, the bank already has your information. 
What we’re seeing is, there’s a streamlined process. If you’re already using the same bank that you’ve already applied for, they already have your information. They just need it updated to show that you’ve had that 25% decrease, then they need to get those updated payroll registers. So, what we’re seeing in the process is more efficient for those that are going through the same bank that they’ve already gone through. We’re also seeing faster approval times. Now, if fintech is your financial institution like PayPal, we’re seeing faster approval rates with that Kabbage loan, just because our technology is more ready to be able to process loans like this online. What we’re usually seeing is a 24-hour turnaround rate, sometimes even within a week, but definitely much faster than the original tranche to those PPP loans. I hope that this information has been extremely helpful for you guys. I look forward to seeing you. Again, don’t forget to sign up for our Profit First Masterclass. That’s going to be hosted in our private Facebook group. If you’re not already a member of our Facebook group, go into Facebook and look for Profit First Master Class with Susanne Mariga. I look forward to seeing you guys next time. And until then, may the profits be with you.
I want you to have your most profitable year ever. Yes, no matter what’s going on in the economy, no matter what’s going on in the world, you can have your best year ever. I want to show you how. Join me in our private Facebook group where I will be hosting our Free, Yes, I said Free Profit First Masterclass on Facebook. Please join the Profit First Master Class with Susanne Mariga. I look forward to seeing you there and watching you have your best year ever.

DISCLAIMER: The information contained within these podcast is provided for informational purposes only and does not constitute, an accountant-client relationship. While we use reasonable efforts to furnish accurate and up-to-date information, we assume no liability or responsibility for any errors, omissions, or regulatory updates in the content of this video. Any U.S. federal tax advice contained within is not intended to be used for the purpose of avoiding penalties under U.S. federal tax law.

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