ATTN: For information on the second round of PPP loans, scroll down.
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Health Updates
Business Resources
- SBA: Paycheck Protection Program (PPP)- Forms and Guidance Lenders and Borrowers
- Oklahoma COVID-19 Resources
- Governor Stitt's "Open Up and Recover Safely" Plan (OURS)
- COVID-19 Federal Rural Resource Guide
- Oklahoma Business Resources
- Oklahoma Workforce and Jobs Resources
- Consumer Protection Unit
- Guidance for Employers to Plan and Respond to Coronavirus (COVID-19)
- Coronavirus (COVID-19) Workplace Tips for Employees
- Combating the Coronavirus
- Information on People at Risk for Serious Illness from COVID-19
- Coronavirus Small Business Guide – U.S. Chamber of Commerce
- Coronavirus Response Toolkit – U.S. Chamber of Commerce
U.S Small Business Administration
Paycheck Protection Program - PPP Loans (Round Two)
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New COVID-19 relief package includes additional $284 billion for Paycheck Protection Program (PPP)
The package passed in December 2020 provides additional funding for businesses that did not receive PPP money in the first round. It also allows businesses a second chance at PPP money if they can show losses of 25% or higher in 2020 over their 2019 revenue. The new law allows for the deductibility of expenses paid for under PPP funds. See the PPP second draw program rules for details. Check the Small Business Administration’s PPP page and Treasury Department’s CARES Act page for additional information as it becomes available. |
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Here's what you need to know:
Terms and conditions of PPP loans round two
The new PPP loans are largely subject to the same terms and conditions of the first round, including the following:
Borrowers applying for a second round of PPP must also have used all of the first tranche of funds prior to or by the date of receiving new funds. And, while those businesses that were or are temporarily closed due to the Covid-19 pandemic may apply for round two, those business that are permanently closed cannot.
The new law also carved out additional benefits for restaurants, hotels, and other businesses under the NAICS Code 72. These businesses can calculate their loan amount by multiplying one month of 2019 payroll by 3.5 instead of 2.5, thus receiving more funds. This also applies to seasonal businesses and those without 12 months of operating history. Further, for restaurants and hotels with multiple locations, as long as each one has fewer than 300 employees, each individual location may apply for a separate loan. The maximum loan amount across all locations, however, is capped at $4 million.
More businesses now eligible
The Economic Aid Act also expanded the list of businesses that are now eligible to receive PPP loans. These new groups include 501c(6) organizations like chambers of commerce, nonprofits and religious entities, and local news organizations. These loans are also capped at $2 million.
In addition, the new law earmarked $15 billion in straight grants that do not need to be repaid for live entertainment venues, which were some of the hardest hit businesses due to Covid shutdowns. These businesses include theaters, museums, and zoos. It also includes businesses that represent performers. It is important to note that the main activity of a business must be live entertainment, so a restaurant that provides a nightly singer, for example, would not be eligible.
The SBA also issued Guidance on Accessing Capital for Minority, Underserved, Veteran, and Women-Owned Business Concerns in an effort to address the main criticism of the initial PPP. This criticism, harsh at times, was that small business of less than 10 employees, women- and minority-owned businesses, and those in economically disadvantaged areas, were shut out of the program while large businesses, chains, and publicly traded companies received funding.
This guidance outlined the following set-asides for these businesses:
New forgiveness rules
Writ large, the new PPP round has the same requirements for having the loan forgiven and turned into a grant. Borrowers still have to use 60% of the funds on payroll and 40% on expenses over a 24-week period. In a positive development, borrowers of loans of $150,000 or less can “check the box,” self-certifying they used funds according to regulations, making the application process much simpler.
In addition, the Economic Aid Act expanded the list of expenses from the original short list of rent, utilities, mortgages, and interest on existing debt, to include essential supplier costs, personal protection equipment, and operational expenses such as software, accounting, and cloud computing.
As with round one, borrowers must still attempt to keep their head count intact to the extent possible. A reduction in over 25% of salaries will result in a commensurate reduction in overall forgiveness. The rules do provide the caveat that if a borrower cannot find employees to rehire, or if they are shut down due to Covid, they have a “safe harbor” and will not be penalized for a reduction in head count of greater than 25%.
The rules also now do not require borrowers to deduct any grants they received if they applied for the SBA’s other loan program, the Economic Injury Disaster Loans (EIDL). These grants were anywhere from $1,000 to $10,000 depending on the number of employees. The EIDL grant program did run out of money and the Economic Aid Act refunded the program to the tune of $40 billion. Businesses that did not apply for the grant or that did not receive the full amount can now apply.
Tax consequences
One of the biggest issues with the first round of PPP was the unintended tax consequences. While it was clear that a forgiven PPP loan would not be considered income, Treasury guidance did not permit normally deductible expenses paid for by PPP funds to be deductible. By incurring this tax burden, the government was, in fact, taxing PPP grants. Due to effective lobbying by every business group in Washington, the new law fixed this problem and now expenses paid for by PPP funds are deductible.
Finally, businesses that received PPP loans were not eligible to also take the Employee Retention Tax Credit. This program allows employers to deduct up to $14,000 per employee on tax withholdings. Now businesses are able to get PPP loans and avail themselves of the tax credit, providing they can show a reduction of revenue of 25% or more in a quarter of 2020 over 2019. The tax credit is available in Q1 and Q2 of 2021 and is both refundable, meaning the IRS will send employers checks, and advanceable, meaning employers can apply for the credit in advance of paying their employees.
The new PPP loans are largely subject to the same terms and conditions of the first round, including the following:
- The loans are 100% guaranteed by the federal government;
- No collateral is required;
- No personal guarantees are required;
- The interest rate will be 100 basis points or 1%, calculated on a non-compounding, non-adjustable basis;
- The maturity is 5 years; and
- Loans will be processed by authorized lenders who will be permitted to rely on certifications of the borrowers to determine the borrower’s eligibility and use of the loan proceeds.
Borrowers applying for a second round of PPP must also have used all of the first tranche of funds prior to or by the date of receiving new funds. And, while those businesses that were or are temporarily closed due to the Covid-19 pandemic may apply for round two, those business that are permanently closed cannot.
The new law also carved out additional benefits for restaurants, hotels, and other businesses under the NAICS Code 72. These businesses can calculate their loan amount by multiplying one month of 2019 payroll by 3.5 instead of 2.5, thus receiving more funds. This also applies to seasonal businesses and those without 12 months of operating history. Further, for restaurants and hotels with multiple locations, as long as each one has fewer than 300 employees, each individual location may apply for a separate loan. The maximum loan amount across all locations, however, is capped at $4 million.
More businesses now eligible
The Economic Aid Act also expanded the list of businesses that are now eligible to receive PPP loans. These new groups include 501c(6) organizations like chambers of commerce, nonprofits and religious entities, and local news organizations. These loans are also capped at $2 million.
In addition, the new law earmarked $15 billion in straight grants that do not need to be repaid for live entertainment venues, which were some of the hardest hit businesses due to Covid shutdowns. These businesses include theaters, museums, and zoos. It also includes businesses that represent performers. It is important to note that the main activity of a business must be live entertainment, so a restaurant that provides a nightly singer, for example, would not be eligible.
The SBA also issued Guidance on Accessing Capital for Minority, Underserved, Veteran, and Women-Owned Business Concerns in an effort to address the main criticism of the initial PPP. This criticism, harsh at times, was that small business of less than 10 employees, women- and minority-owned businesses, and those in economically disadvantaged areas, were shut out of the program while large businesses, chains, and publicly traded companies received funding.
This guidance outlined the following set-asides for these businesses:
- $15 billion across first and second draw PPP loans for lending by community financial institutions;
- $15 billion across first and second draw PPP loans for lending by Insured Depository Institutions, Credit Unions, and Farm Credit System Institutions with consolidated assets of less than $10 billion;
- $35 billion for new first draw PPP borrowers; and
- $15 billion and $25 billion for first draw and second draw PPP loans, respectively, for borrowers with a maximum of 10 employees or for loans less than $250,000 to borrowers in low- or moderate-income neighborhoods. The SBA has determined that at least 25%of each of those set-asides will go to each one of the groups: loans to borrowers with a maximum of 10 employees and loans less than $250,000 to borrowers in low- or moderate-income neighborhoods.
New forgiveness rules
Writ large, the new PPP round has the same requirements for having the loan forgiven and turned into a grant. Borrowers still have to use 60% of the funds on payroll and 40% on expenses over a 24-week period. In a positive development, borrowers of loans of $150,000 or less can “check the box,” self-certifying they used funds according to regulations, making the application process much simpler.
In addition, the Economic Aid Act expanded the list of expenses from the original short list of rent, utilities, mortgages, and interest on existing debt, to include essential supplier costs, personal protection equipment, and operational expenses such as software, accounting, and cloud computing.
As with round one, borrowers must still attempt to keep their head count intact to the extent possible. A reduction in over 25% of salaries will result in a commensurate reduction in overall forgiveness. The rules do provide the caveat that if a borrower cannot find employees to rehire, or if they are shut down due to Covid, they have a “safe harbor” and will not be penalized for a reduction in head count of greater than 25%.
The rules also now do not require borrowers to deduct any grants they received if they applied for the SBA’s other loan program, the Economic Injury Disaster Loans (EIDL). These grants were anywhere from $1,000 to $10,000 depending on the number of employees. The EIDL grant program did run out of money and the Economic Aid Act refunded the program to the tune of $40 billion. Businesses that did not apply for the grant or that did not receive the full amount can now apply.
Tax consequences
One of the biggest issues with the first round of PPP was the unintended tax consequences. While it was clear that a forgiven PPP loan would not be considered income, Treasury guidance did not permit normally deductible expenses paid for by PPP funds to be deductible. By incurring this tax burden, the government was, in fact, taxing PPP grants. Due to effective lobbying by every business group in Washington, the new law fixed this problem and now expenses paid for by PPP funds are deductible.
Finally, businesses that received PPP loans were not eligible to also take the Employee Retention Tax Credit. This program allows employers to deduct up to $14,000 per employee on tax withholdings. Now businesses are able to get PPP loans and avail themselves of the tax credit, providing they can show a reduction of revenue of 25% or more in a quarter of 2020 over 2019. The tax credit is available in Q1 and Q2 of 2021 and is both refundable, meaning the IRS will send employers checks, and advanceable, meaning employers can apply for the credit in advance of paying their employees.
Talk to a local loan officer to learn more
Bank of Cherokee County:
Ashton Thurman - a.thurman@bankofcherokeecounty.net
Charlene Morrison - c.morrison@bankofcherokeecounty.net
BankFirst:
Michael Torkelson - michael.torkelson@bancfirst.bank
Cathy Wilcox - cathy.wilcox@bancfirst.bank
Joshua Stafford - joshua.stafford@bancfirst.bank
Allen Scroggins - allen.scroggins@bancfirst.bank
Christie Jackson - christie.jackson@bancfirst.bank
First State Bank:
Marty Hainzinger - mhainzinger@fsbtahlequah.com
Paul Center - pcenter@fsbtahlequah.com
Armstrong Bank:
Bobby McAlpine - mcalpineb@armstrongbank.com
Barbara Goode - goodeb@armstrongbank.com
Denise Ballard - ballardd@armstrongbank.com
Kyle Taylor - taylork@armstrongbank.com
Shawna Hemmerich - hemmerichs@armstrongbank.com
Ashton Thurman - a.thurman@bankofcherokeecounty.net
Charlene Morrison - c.morrison@bankofcherokeecounty.net
BankFirst:
Michael Torkelson - michael.torkelson@bancfirst.bank
Cathy Wilcox - cathy.wilcox@bancfirst.bank
Joshua Stafford - joshua.stafford@bancfirst.bank
Allen Scroggins - allen.scroggins@bancfirst.bank
Christie Jackson - christie.jackson@bancfirst.bank
First State Bank:
Marty Hainzinger - mhainzinger@fsbtahlequah.com
Paul Center - pcenter@fsbtahlequah.com
Armstrong Bank:
Bobby McAlpine - mcalpineb@armstrongbank.com
Barbara Goode - goodeb@armstrongbank.com
Denise Ballard - ballardd@armstrongbank.com
Kyle Taylor - taylork@armstrongbank.com
Shawna Hemmerich - hemmerichs@armstrongbank.com
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