If you’ve earlier received a PPP (Paycheck Protection Program) loan, you must know that certain businesses are entitled for a second PPP loan. Second Draw PPP loans can be used to help fund payroll costs, and also to pay for mortgage, interest, utilities, rent, worker protection costs associated to COVID-19, uninsured property damage costs triggered by looting during 2020, and certain supplier costs & expenses for operations.
Here is a guide to take the guesswork out to make sure you are getting access to the funding your business requires to flourish in 2021.
Who may qualify for a Second Draw PPP loan?
A borrower is usually entitled for a second PPP loan if he/she:
●Has used the first PPP loan
●Has no more than three hundred workers & can show a minimum of 25 percent of reduction in gross receipts between comparable quarters in 2019 and 2020.
Where should one apply for a Second Draw PPP loan?
Though you can apply for your second Paycheck Protection Program loan via any lenders, it is advocated that you apply via our 1st PPP loan lender.
We recommend to check in with your lender prior to filling in the application. Some lenders will ask you to submit your info via their online portal in contrast to submitting a paper application.
Foster Financial CPA can help connect you with a lender. All second PPP loans will have the same terms irrespective of lender or borrower.
How is your loan amount calculated?
The calculation of your loan sum begins with finding your average monthly payroll costs. Your average monthly payroll costs will be calculated using any of the following:
●the one year period prior to the loan application
●the calendar year of 2020
●the calendar year of 2019
Once you have selected the time length you wish to use, follow these below mentioned steps:
●Add the payroll costs for all employees whose main residential place is in the US.
●Deduct any compensation paid to a worker or earned as self-employment earning in excess of $100,000.
●Divide the total sum from step 2 by 12 and put it in the average monthly payroll box.
As soon as you’ve your average monthly payroll costs, finding your loan sum is as straightforward as multiplying it by 2.5 or 3.5. The majority of businesses will make use of the 2.5 formula, which was used in 2020. However, businesses in the food & accommodation industry are entitled for 3.5 times of their average monthly payroll costs.
Foster Financial CPA is an online bookkeeping service powered by real humans. With us you can avail a dedicated bookkeeper for a clear view of your financial health. All of our services are eligible expenses for Paycheck Protection Program forgiveness, and we can even give support in applying for the second draw PPP loan as well.
Tax Tips for the Self-Employed – Foster Financial
6 Benefits of Having a CPA on Retainer
Brand Awareness and Your Small Business
5 Steps You Must Take for Small Business Growth
What is a Tax Planning Strategy?