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What Small Businesses Should Know About Round 2 PPP Funding

December 23, 2020

The $900 billion December 2020 COVID-19 relief bill was included in the Omnibus Spending Bill, which appropriated $1.4 trillion to various federal agencies for 2021. There is a massive amount of spending in this bill, but this advisory only addresses the subsection on “Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act” — or what will be referred to here as Round 2 of the Paycheck Protection Program (PPP). After bipartisan passage of the bill in the House and Senate, President Trump signed the bill into law on Dec. 27, 2020.

All small businesses should be aware that this program is in addition to any PPP funding previously received. A small business that received a prior PPP loan can still apply and is expressly eligible for Round 2.

New Allowable Uses

In the original PPP, a small business could apply for a loan in varying amounts, but the loan was only forgivable if the loan proceeds were used for limited and expressly identified allowable uses.[1] Round 2 of the PPP has the following new allowable uses:

  1. Covered operation expenditures;
  2. Covered property damage costs;
  3. Covered supplier costs; and
  4. Covered worker protection expenditures.

A covered operation expenditure is defined as “a payment for any business software or cloud computing service that facilitates business operations, product or service delivery, the processing, payment, or tracking of payroll expenses, human resources, sales and billing functions, or accounting or tracking of supplies, inventory, records and expenses.” While we do not have additional clarity yet on this definition, it appears Congress understands that COVID-19 forced smaller businesses to incur new costs related to accounting, human resources, and/or general record-keeping. This provision appears to allow small businesses to upgrade their software and cloud computing in some important areas.

A covered property damage cost is defined as “a cost related to property damage and vandalism or looting due to public disturbances that occurred during 2020 that was not covered by insurance or other compensation.” This provision appears very limited, but it could be helpful to some businesses.

A covered supplier cost is defined as “an expenditure made by an entity to a supplier of goods for the supply of goods that” are essential to the business operation or that is made pursuant to a contract, order or purchase order. Of interest, this specifically applies to “perishable goods.” For example, restaurants may have taken large losses ordering perishable goods that the business was unable to use. As this summary is being written, it would appear to cover any such losses that occurred during the covered period, and, more importantly, before the covered period. The covered period begins on the date of the origination of the loan and ends at a date to be chosen by the loan applicant which is at least eight weeks after the date of origination and no more than 24 weeks after the date of origination.

A covered worker protection expenditure is defined as “an operating or a capital expenditure to facilitate the adaption of the business activities of an entity to comply with requirements established or guidance issued by the Department of Health and Human Services, the Centers for Disease Control or the Occupational Safety and Health Administration, or any equivalent requirements established or guidance issued by a State or local government during the period beginning on March 1, 2020” (emphasis added) and ending when the president declares the COVID-19 national emergency to be over. In case this is not clear enough, the bill specifies this may include “the purchase, maintenance, or renovation of assets that create or expand”:

  1. a drive-through window;
  2. an indoor air ventilation, air pressure, or air filtration system;
  3. an outdoor air ventilation, air pressure, or air filtration system;
  4. an expansion of additional indoor, outdoor, or combined business space;
  5. an onsite or offsite health screening capability;
  6. a physical barrier such as a sneeze guard; and
  7. additional miscellaneous items such as personal protective equipment.

This provision appears vital for any forward-thinking small business, especially a restaurant. Round 2 of the PPP will allow a small business to get forgivable loan proceeds to make those changes now, which may protect them in the future. These changes must be made during the covered period. Outdoor heating systems, portable air filtration systems, new HVAC systems, or even ultraviolet light in the ceiling are options to consider relating to virus issues.

New Simplified Forgiveness Application

As with the original PPP, the borrower must seek forgiveness. It is not automatic. However, in Round 2, Congress is making the forgiveness application even easier for loans up to $150,000. A form will be created that must be no longer than one page. The administrator of the PPP has 24 days to create this form. Once it is made public, a PPP borrower with a loan up to $150,000 will get forgiveness simply by completing the form, and maintaining records to prove what the funds were used for over a period of time (three or four years depending on the expenditures). For loans greater than $150,000, the borrower will need to submit certain identified documents to the lender to prove how the funds were used. If used properly, the loan becomes a forgivable loan.

Consistent with the prior goal of the original PPP program, Round 2 has a mandate that a certain percentage of the loan proceeds must be used on employee payroll costs.  It appears that minimum is 60 percent of the loan proceeds, but future rules should clarify this issue. The original PPP’s primary goal was ensuring employees of these small businesses continued to receive paychecks.

$284 Billion in New Money is Available

In Round 1 of the PPP, $350 billion was disbursed to small businesses in just two weeks. In Round 2, a total of $284 billion is technically available, but the total is misleading. For example, $35 billion is set aside for those small businesses that have never received PPP funding, and an additional $40 billion is set aside for small businesses with less than 10 employees OR an employer located in a low-income area seeking less than $250,000. These set-asides for limited groups seem to indicate the $284 billion will be not be available for long. Those who read this advisory and are prepared to apply for the loan immediately will have an advantage.

The Calculation for the Loan Maximum is Similar to the Original PPP

Round 2 of the PPP offers an applicant two options to decide how to calculate the average total monthly payment for payroll costs.[2] The applicant can use 2019 numbers or the one-year period prior to the application. Once the average total monthly payment for payroll costs is calculated, the applicant can multiply the result by 2.5 to determine the maximum amount of the loan.

For example, if a small business has 20 employees making $3,000 a month in salary and another $1,000 per month per employee for other expenses allowed to be included in total monthly payroll costs, that small business can apply for a maximum amount of $200,000. If the small business falls under 72 in the NAICS entity code (Accommodation and Food Services), the math is the same except the multiplier is 3.5. Therefore, the fictional small business in the first sentence of this paragraph could apply for a maximum amount of $280,000.

New Criteria for Qualification

There are multiple factors to consider with respect to eligibility for a Round 2 loan. While businesses, non-profits, self-employed individuals, and independent contractors may be eligible, there are exclusions. For example, a company that was not doing business on Feb. 15, 2020, is ineligible for a Round 2 loan. The gross receipts of the applicant in each quarter of 2020 are also relevant in determining eligibility. The total number of employees, the number of locations, and even the type of business conducted will be factors in determining eligibility and/or how much the applicant can get. In a very general sense, a small business with fewer than 300 employees, very few locations, and a loss of at least 25 percent in gross receipts in at least one quarter of 2020 compared to that same quarter of 2019 will be eligible for a Round 2 loan.

Your bank should be able to help you determine if you qualify. If you are a small business interested in applying for Round 2 funding from the PPP and would like guidance prior to going to your bank, please contact Paul Petruska at or your regular Greensfelder contact.


[1] Original PPP allowable uses included: 1) employee wages and benefits, 2) interest on mortgage obligation, 3) rent, 4) utilities, and 5) interest on any other debt obligation incurred prior to the “covered period”

[2] The term “payroll costs” includes salaried, hourly wage, or cash tip payrolls. It also includes vacation, parental, family, medical and sick leave; payment for health group insurance; payment of retirement benefit; and payment of the state and local tax assessed on the compensation of employees. It does not include payroll costs for employees making $100,000 or more.

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