PPP restart brings new COVID-19 commercial funds

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As Congress scrambles to craft the next phase of COVID-19 stimulus and relief legislation, both sides of the aisle appear to agree to expand the Paycheck Protection Program (PPP) to to include more funds for small businesses that have already received a PPP loan. While differences remain between the proposals put forward by Democrats and Senate Republicans, a common framework is beginning to emerge, strongly suggesting that final legislation will include a new round of much-needed financing for small businesses affected by the pandemic.

The Health, Education, Economic Aid, Accountability and Schools (HEALS) law, proposed this week by Senate Republicans, provides $ 190 billion for “second-draw PPP loans”. Similar to the original PPP program under the CARES Act, it includes a maximum loan amount of 2.5 times a company’s average monthly salary costs and imposes a requirement that at least 60% of loan proceeds be used. for payroll. To be eligible for a second loan, however, a business must meet the SBA’s revenue size standard (if applicable), must have no more than 300 employees, and must demonstrate a reduction of at least 50% of its income. gross revenues in the first half of 2020, compared to the same period in 2019. Notably, the Republican proposal excludes publicly traded companies from receiving second-round funding, as well as companies in the financial services industry and affiliated entities to entities of the People’s Republic of China.

The Democrats ‘plan calls for a “priority paycheck protection program” or a “P4” loan, the terms of which are in line with the Republicans’ proposal. It would be limited to companies with 100 or fewer employees who would also have to demonstrate a 50% loss in revenue. Like the Republican plan, publicly traded companies would be excluded from the P4 program.

Both proposals include provisions that should facilitate the process of applying for a remission – a process that has so far been a source of confusion and frustration for borrowers and lenders. The Republican proposal provides for a simplified application process for loans up to $ 150,000, where borrowers can obtain a discount based only on proof of a good faith effort to comply with the requirements for PPP loans. Likewise, for loans up to $ 2 million, borrowers would need to complete the required certifications, but would not need to submit any documents when requesting a remission. Democrats who have expressed concerns about existing procedures for obtaining a loan forgiveness are likely to agree to these types of easing measures.

Finally, legislation clarifying the deductibility of expenses related to the cancellation of PPP loans remains an issue that appears to be supported by Democratic and Republican lawmakers. Such a measure would make it clear that borrowers are allowed, for tax purposes, to deduct expenses related to the amount forgiven, such as payroll, benefits, rent and utilities. While deductibility was not addressed in the Republican’s most recent proposal, it has appeared in earlier drafts and is expected to reappear as an agreed feature of the final legislation.


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