Paycheck Protection Program (PPP)2021 Update


As we all know, PPP offers loans to assist businesses in maintaining their workforce during the COVID-19 crisis. Around April of 2020, the first round of PPP helped the American economy recover from the initial shock to the trade and industry caused by business closure due to the pandemic. Considering how coronavirus have been ravaging the globe, these loans could cover only some months.

Sadly, many receivers of the PPP loan closed, if not laid-off workers, after the loans were consumed. Now, as you might already be aware, the second round of PPP is being issued. It allows firms to obtain a second PPP loan if they incurred a decrease of at least 25% in their 2020 revenue compared to their 2019 figures.

Requirements and Formula

Similar to the first PPP round, the second applications are made through a bank after meeting these requirements:

1. The company has only a maximum of 300 hired people;
2. The firm has used or intends to use the full first PPP loan amount;
3. The business can show a decline of at least 25% in 2020 gross receipts or any quarter of the same year. The point of comparison is the figures in 2019 or its same quarter; and,
4. Have not permanently closed.

Businesses that have temporarily closed or suspended their operations can receive a second-draw loan. The formula for the second PPP is similar to the first PPP. The amount borrowed is up to 2.5 times the average monthly payroll cost of the borrower. Businesses in the restaurant or hospitality industry can even get 3.5 times their monthly payroll costs. The average monthly fees can be calculated using their recorded figures for 2020, 2019, or 12 months before the loan.


1. 25% Decline in Revenue Documentation
For those borrowing less than $150,000, no papers, such as financial statements, bank statements, and other valid tax forms, are required. The borrower must provide documents, though, upon or before seeking loan forgiveness or upon the Small Business Administration or SBA request. If the loan amount is beyond $150,000, you will have to submit documentation of the reduction in revenues.

2. Loan Forgiveness
First PPP Loans granted to qualified borrowers can file for loan forgiveness in full when their covered period of eight to 24 weeks following the loan disbursement complied with the following rules:

1. Employee and pay levels are kept (there are safe harbor rules), and
2. The loan proceeds are spent on at least 60% of payroll costs and the rest on other eligible outlays.

Borrowers of the first PPP round of $150,000 or less can submit a one-page certification for forgiveness. NO DOCUMENTATION IS REQUIRED unless the loan amount is over $150,000. The second PPP forgiveness terms qualify eligible borrowers for loan forgiveness in full for the same rules.

3. Tax-Deductible
Initially, PPP was not taxable income, but the business expenses incurred with the PPP funding was NOT tax-deductible. This raised a lot of questions and caused an accounting nightmare for business owners. Fortunately, the latest coronavirus relief bill included a provision that allows the expenses to be fully deductible so yes, you can “double-dip”.
Suppose you are unsure of your qualifying for the second round of PPP loan. If so, contact Kauffman|Kim, LLP today!

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