Although we have already addressed some of these program installment loans Rhode Island changes in a previous blog post , for clarity some points are repeated below.
Recalculation of 1st draw PPP loans
A new provision (Division N, Title III, Section 313) in the CAA allows Schedule F filing sole proprietors, independent contractors, or self-employed individuals to retroactively recalculate their PPP 1st draw loans based on their 2019 gross income, instead of their 2019 net income. Schedule F filers are farmers and ranchers. In other words, farmers may not recalculate PPP 1st draw loans that are already forgiven. Farmers and ranchers meeting the new qualifications will also be allowed to use the gross income calculations for PPP 2nd draw loans issued in the future. Annualized maximums remain at $100,000 per employee (Division N, Title II, Section 344). The annualized maximum applies to the new gross income based farm and ranch owner’s compensation calculations as well, with few exceptions. While non-farmers and non-ranchers may also be able to qualify for possible recalculations or first-time loans under specific circumstances, the recalculation based on gross versus net income is specific to Schedule F filers (i.e. only farmers and ranchers). The flow-chart below shows producers how to determine if they qualify for new 1st draw PPP funds, either via a first-time application or via a reapplication. The chart is adapted from materials from the National Association of Farm Business Analysis Specialists (NAFBAS) and used with their permission. If you qualify, you need to contact your lender. If you wish to begin preparing your application, you can download the PPP 1st draw borrower application form 2483 to see the information that will be requested from you when you contact your lender.
2nd draw PPP loans
In December, Congress funded an additional $ billion (Division N, Title III, Section 323) for a second-round (or “2nd draw”) of PPP for businesses with 300 employees or less with a final covered period date of (Division N, Title III, Section 343). Farmers and other small business owners that already received and appropriately spent down a first round of PPP in 20 under certain conditions. PPP 2nd draw loans are available to applicants only if they experienced “at least a 25 percent reduction in gross receipts in the first, second, third, [or fourth] quarter of 2020 relative to the same 2019 quarter ” (Division N, Title III, Section 311). For most borrowers, the maximum loan amount of a 2nd draw PPP loan is 2.5x average monthly 2019 or 2020 payroll costs, up to $2 million. This is a familiar calculation for those that closely followed PPP last spring. For some borrowers, the maximum loan amount for a 2nd draw PPP Loan is 3.5x average monthly 2019 or 2020 payroll costs up to $2 million. It would be unusual for farmers or ranchers to qualify for this higher 2nd draw amount as it only affects businesses in the North American Industry Classification System (NAICS) code 72, the accommodation and food services sector. An on-farm restaurant or on-farm food service establishment could be in this NAICS class.
The flow-chart chart below walks 2020 1st draw PPP recipients through determining if they qualify for a 2nd draw. The flow-chart also addresses the Employee Retention Credit (ERC), which we discuss more in the second half of this blog post. This second chart is also adapted from materials from the National Association of Farm Business Analysis Specialists (NAFBAS) and used with their permission.
If you qualify for a 2nd draw of PPP, you need to contact your lender. SBA will accept initial 2nd draw loan applications from certain community financial institutions (CFIs), “to promote access for smaller lenders and their customers.” The application opens to all lenders on January 19. Prior to contacting your lender, you ple application to see the information that will be requested from you from your lender. You can download the PPP borrower 2nd draw application form 2483-SD here.