Get Ready for 2021 Paycheck Protection Program
The new funds allocated for this program will not last long. Because many of the flaws in the SBA’s forgivable PPP Loan program have been cured by the new stimulus bill, I believe this round of funding will go as quickly as the first. Many recipients of PPP loans in 2020 will qualify for another PPP loan. If you think you qualify for one of these new PPP loans, you should start working now on getting your books closed and your accounting records in shape.
Companies with a 25% or more reduction in gross receipts in any quarter from 2019 to 2020 are eligible for a forgivable loan of up to $2 million. Quarterly financial statements comparing 2019 to 2020 gross receipts will be needed to establish eligibility. Many PPP borrowers will qualify for a second PPP loan.
For anyone outside the hospitality industry, the maximum loan amount is 2.5 times average monthly payroll, the same as for 2020 PPP. Borrowers in the hospitality industry can get 3.5 times their average monthly payroll. You will need 2020 quarterly federal payroll tax returns (forms 941), state and federal unemployment tax returns, and other payroll reports to establish your payroll costs for determining the loan amount.
Payments for employee health benefits and retirement plan contributions are included in the computation of allowable payroll costs. Identify payments made for health and pension benefits.
Having your 2020 business payroll and income tax returns available to submit with your application may speed up the process. This will be especially important for self-employed borrowers.
Contact your bank and find out when they plan to begin accepting applications. Find out how your bank plans to process applications. Be prepared to submit your application with required exhibits and attachments electronically.
Mark S Gleason CPA