As always, the devil is in the details.
The new legislation makes it extremely clear: you are eligible for the second round of PPP if your gross receipts in one quarter of 2020 are 25% less than the same quarter in 2019. This equation is simple math and black and white.
We don’t know yet if there will be a requirement for an additional sign off. For example, a CPA, lawyer or notary, that states that you need the second round to ensure your business's ongoing operations. This attestation was a requirement in the first round of PPP.
This open question is not an issue for businesses still hanging on by a thread and struggling to survive. But there are plenty of companies off in Q2 and then managed to pivot and recover nicely. I know of many businesses that took an initial hit at the beginning of Covid-19 but ended the year stronger and more profitable than last year.
My question for this community is – should businesses that have recovered in this manner be eligible for another round of forgivable PPP? Should they be required to state that they need the money? Let’s discuss.
Yes they should need the money and state so in an affidavit.
This sounds like more giveaways, and is begging for abuse. No, companies should have to show real permanent threats to their business, not just a temporary blip from which many quickly recovered. We keep on adding TRILLIONS to the deficit, with little concern for the long-term consequences. I am all for helping the little guy with a pizza parlor, but this turned into a feeding frenzy with everyone saying "Where's mine??!!", whether they need it or not.
Businesses who do not need the funds should not be eligible. Not every American needs $600 or $2,000, either. There is a challenge, however, that having to jump through hoops makes it harder for those who need it to get the help they need. In my opinion, though, we are putting our country at greater risk by throwing money at the problems. Any help from government will have to be funded someday, somehow by someone. By simply running up the government debt to stave off short-term problems, we are setting ourselves up for bigger problems in the future. When we talk about extraordinary measures to prolong life, we also need to discuss the quality of life, whether human life or business life.
I fall into the category that was dramatically down in March and April and got PPP but then had a strong year after that-I would never consider asking for more now. I do feel it should be for those struggling at this time as well as down 25% or more earlier in the year.......save those that need saving!
I don't think the money should be available for those that have recovered nicely. Businesses who do not need the funds should not be eligible. There are many companies that are in dire need to avoid closure or bankruptcy and allowing healthy companies to take these funds only adds to the already feverish race to apply. Why should the country go further into debt for those that just want the 'free' money?
Playing devil's advocate here, so I hope my comment is received as a way to look at the other side of your argument.
If we see this situation continue where businesses struggle due to lockdowns, would it be best to encourage those that are currently on the brink of failure to cut their losses now? This way we could invest the funds in businesses that are producing aka paying taxes?
This of course depends on how you see the next 3-6 months playing out in each state.
Again, I am not necessarily a proponent of this because real people are involved and I do not believe in giving money to specific classes of people/businesses, but the thought is interesting if we are considering a way to get out of all of this debt.
Fair point. I think I look at this through my lens...my husband and I own what was once a very large off-premise catering company that has been decimated by the restrictions. We are 80% down over last year and our December was a whopping 94% down from 2019. When the first round came out, I was pressured into the 'mad-rush for toilet paper' because everyone was applying for 'free money' and I was forced to take my PPP money before we had anything for our staff to do. I don't want a free hand-out, but it has kept my company open and this second round is needed just as much.
I do think preference should be given to those that are on the brink of disaster first...if there is money leftover, then others can partake if the funds are truly needed. Otherwise, I stand firm that if companies don't really need the money, they shouldn't be eligible.
Ingrid, I am in the same boat as you are. Off premise catering in NYC. Unfortunately, because we use quite a few staffing companies, our FTE/s/Gross payroll and hence our PPP loan was fairly small compared to other companies of my size. Luckily, the new PPP loan gives businesses with NAICS codes beginning with 72, 3.5x monthly payroll this round. This will be the life line that will hopefully allow us to keep our doors open until the summer when things will still be down at least 50% but not the 90% we are currently down.
I can so feel your pain. We don't use staffing agencies unless absolutely necessary (they aren't as big here in Colorado), so we got a decent amount...not enough but decent. I am relieved about the 3.5x...it will help!
I agree with Beth. Our company will end the year down around 60% or 2020 (vs. 2019). At one point, we were down 90%, then 80% . . . a strong, by COVID standards, 4th quarter helped us mitigate our losses. In my view, a company should have to "prove" need . . . as Paul noted, there should be real concern about the long term consequences of unmanageable, imprudent deficit spending. Down 20% for one quarter doesn't seem to me significant enough to justify PPP II participation . . .
The problem in if you are a small business and a restaurant your gross receipts may be hanging in there, but your cost are out of site. The delivery companies: Door Dash, Uber Eats, Grubhub, etc. are all taking their pound of flesh 25-30% of the gross receipt. The "to-go" containers are more expensive, the disinfection, the sanitizers, the mask, etc. etc. You can have a business which is doing OK in terms of gross receipts, but where as you use to make money, you are not loosing money and thus cannot afford to pay the bills. This is reality, and this PPP plan does not address these issues.
Great thought Danny!
In reading the summary of the legislation, it's pretty clear to me that only those that need the funds and can make the certifications and document their needs can request the second draw of PPP funds. They have made two things very clear in this new round of support - 1) They will be auditing heavily - lots of money in the budget to make sure of this and more talk about keeping documents connected to the loan available for many years for audit purposes. 2) Business owners still have to meet the FTE and Salary/Hourly requirements for the second round of PPP. BIG NOTE: They plan on going after people that took unemployment funds and refused to return to work. My guess is there will be more reporting from business owners on employees that did not return.
If you like audits and keeping up with ever changing regulation and guidance, jump right on in to the PPP second round. It promises to be a barrel of fun. Personally, I don't think anyone wants to go through this again unless they truly need the support.
You need to prove you need the funds to survive and keep your employees working. For the year I'm down 45%. Projections for 1st quarter of 2021 I will be down 70% compared to 2019 that's worse than 2020 and nothing in California is opening back up. Without the PPP those of us in the hospitality / event industry will not make it. There are only so many Hospitals that need Covid tents and the restaurants are dropping like flies causing us to pull our gear off rent.
I agree that there should be a need but having a need is hard to quantify. There are businesses, like mine, that had a losing year as a result of COVID - down more than 45% in the last two quarters. Things are better now but for how long? The future economic uncertainty is a real concern. Should we take the help that is being offered while it's available?
I agree with Brianna. I'm not winning in 2020 over 2019, but feel thankful to have open doors at this point...more like we are still in a battle for our lives. We are at the mercy of their state and local government too. I don't want what I don't need, but am concerned for my ability to plan for shut-downs, curfews, and restrictions. Those squeeze revenue from us, and that I cannot plan for. My business is in a heavily hit area in California. Business is down, it's open, it's up. It's closed, it's down again. It's a real roller coaster.
Our company is entering into an agreement to sell 50% of the company. This will result in our company (ticket broker in LA) will own 50%, and ticket broker in NY will own 50%. Can new co apply for PPP?
there already is a certification of need in the second round of ppp, just like in the first. the bigger Q for me is: what about the very vague requirement that a biz has used or is on track to use their first round loan in order to be eligible for this second draw? First of all, it's vague what that means - on track to use? by when? is this just another certification that the company has to make, or do they have to show that the first loan proceeds have been exhausted and if so, by what date? Second, and much bigger picture, this requirement completely ignores that any biz that hasn't spent their first PPP has not done so b/c they have been UNABLE TO OPEN at all! Think of the bar that has not been allowed to operate since 3/16/20 (here in CA) and has held onto their PPP loan to use as working capital to reopen! (not nearly as good as having it forgiven but their best option) This requirement needs to be reconsidered as it will harm the most hard hit businesses.
No, absolutely not. I don’t think that was Congress’s intent. The SBA should make it crystal clear and warn applicants accordingly. The restaurant industry is a good example. Fast food chains took an initial hit but quickly benefited from their drive thrus. But Full Service restaurants are still suffering.
Businesses that took an initial hit but recovered and ended up more profitable than in 2019 should absolutely not be eligible for another round of PPP. They shouldn't have been the first time. For someone with a business in hospitality, down 90%, it is insulting that some businesses got free money that resulted in a net profit of their entire payroll for the 2.5 mo period when many of us are struggling to even stay open. It was insulting enough that businesses who didn't actually need it got it in the first round with nothing more than an attestation and that wasn't a requirement into well into the process.