Help for Businesses and Non-Profits

The PPP is a loan program managed by the Small Business Administration (SBA) and permits lenders (including ChoiceOne Bank) to distribute PPP loans on behalf of the SBA to small businesses.

High Level Summary:

• $284 billion has been allocated to PPP (including $138 billion of unspent loans from the first round that were reinvested) and the program has been extended to March 31, 2021
• Second-draw loans are available for businesses with under 300 employees
• Businesses eligible for PPP loans has been changed
• Forgiveness for loans under $150K have a simplified application
• Eligible expenses for forgiveness have been expanded for first-draw loans that have not yet been forgiven and for second-draw loans.
  • Expenses eligible for forgiveness still require a 60/40 split of payroll costs/other eligible expenses, group health insurance benefits are now included in payroll costs (and these entail life insurance, disability benefits, vision, and dental insurance)
• Covered period that is any period of time between eight and 24 weeks
• A clarification has been made indicating that forgiven PPP loans are not taxable and forgiven expenses are tax-deductible

Only certain businesses are eligible to receive a PPP loan, and these specifications are different for first-time loan recipients and second-draw recipients. Generally a borrower is eligible for a Second Draw PPP Loan only if it has 300 or fewer employees and experienced a revenue reduction in 2020 relative to 2019 (more details below)

Any business that is applying for a second draw will be subject to more stringent limitations. The maximum second PPP loan amount is the lesser of:

• 2.5 times the average monthly payroll costs and healthcare costs in the year prior to when the loan was received or within the calendar year
• 3.5 times the average monthly payroll costs and healthcare costs in the year prior to when the loan was received or within the calendar year for any business that is classified under Code 72 by the North American Industry Classification System (NAICS). (This is a list of hospitality and entertainment businesses like restaurants, hotels, and casinos; click the link to get the full list.)
• $2 million

First Draw PPP loan terms (you don’t already have a PPP loan)

The maximum amount a business that has not yet received a PPP loan can borrow is the lesser of:

• 2.5 times the average monthly payroll costs and healthcare costs
• $10 million

In order for the loan to be eligible for forgiveness, the funds must be used within the covered period. If you have already received a PPP loan from the first round, nothing has changed. Your covered period remains the same.

If you are applying for a first- or second-draw PPP loan, you may choose a covered period that is anywhere from eight to 24 weeks after receiving the loan.

In order to get full or partial PPP loan forgiveness, it is critical that you spend the loan money on covered expenses.

Below is the full list of covered expenses for PPP. Certain items are covered for all PPP recipients, round 1 and round 2, but certain items are only covered for first-draw borrowers of PPP round 2, second-draw borrowers of PPP round 2, and borrowers of PPP round 1 whose loans have not yet been forgiven. We break these down in the tables below.

* These include salaries, wages, tips and commission, and are capped at a max of $15,385 within an eight-week covered period or capped at a max of $46,154 within a 24-week covered period for each employee.

**These are capped at eight weeks worth of the net profit earned in 2019—but not more than $15,385; or two and a half months worth of net profit earned in 2019—but not more than $20,833, depending on the covered period.

40% or less of the loan amount may be spent on:

* In order to qualify for forgiveness, you must keep records and documentation (including purchase orders and invoices) for these expenses.

Taxes and deductibility of forgiven PPP expenses

• The gross income a business is required to report will not include any PPP loan amount that is forgiven
• Any expenses paid for with PPP loan proceeds that are forgiven will be tax-deductible