Small businesses could receive second PPP loan under new proposal

Bipartisan COVID-19 relief proposal would allow new PPP loans, easier PPP forgiveness

Small businesses could receive second PPP loan under new proposal

NPR reported early Wednesday afternoon that congressional leaders were closing in on a new COVID-19 relief deal “expected to include many elements of the bipartisan proposal” suggested by some Senate and House lawmakers Monday.

This could be positive news for collision repairers and other small businesses who could use a second Paycheck Protection Program loan and/or an easier forgiveness process.

The bipartisan group of 11 senators and two U.S. representatives on Monday announced their idea for a potentially $748 billion “Bipartisan COVID-19 Emergency Relief Act of 2020.” (Which we’ll call BECRA for convenience’s sake.)

“COVID infections are rising. Small businesses owners and their employees are afraid of going bankrupt and losing their jobs,” U.S. Sen. Bill Cassidy, R-La., one of the would-be sponsors of that bill, said in a statement Monday.

“Families are wondering how to afford food and rent. This bill reflects weeks of good-faith negotiations from both Republicans and Democrats to find a solution that delivers relief to struggling Americans. This is Congress’ last chance to pass a relief bill before Christmas.

We must deliver for the good of our country.”

The proposal would contain Paycheck Protection Program funding for some small businesses, according to a summary shared by Cassidy. The bipartisan group’s legislation also includes a easier PPP loan forgiveness format for businesses receiving $150,000 or less.

“A dozen Senators usually can’t agree on a lunch order, let alone almost a trillion dollars in federal spending – so the fact that we’re standing here today with a bipartisan bill is evidence of the urgency,” Sen. Mark R. Warner, D-Va., another member of the group, said in a statement. “I will be the first to admit that this deal is imperfect.

But these challenges are simply too urgent to allow politics to interfere. With unemployment and other benefits scheduled to run out just before Christmas, the American people cannot afford for us to wait.

After several weeks of work, I hope that this bipartisan bill moves us closer to providing real relief to the American people without further delay.”

A representative of a coalition of businesses seeking simpler PPP forgiveness said Tuesday that the BECRA bill’s PPP provisions saw “broad agreement” in Washington and had a shot of making a congressional COVID-19 relief deal.

Senate Majority Leader Mitch McConnell, R-Ky., on Wednesday tweeted a vow “to keep working until we get it (a COVID-19 deal) done.” He also described a need “to re-up the Paycheck Protection Program to save jobs.”

The American people need more help. We need vaccine distribution money. We need to re-up the Paycheck Protection Program to save jobs. We need to continue to provide for laid-off Americans.

Congressional leaders on both sides are going to keep working until we get it done.

— Leader McConnell (@senatemajldr) December 16, 2020

BECRA would allow any company with no more than 300 employees to collect a second PPP loan, according to the summary.  The company must have experienced a 30 percent revenue decline in any 2020 quarter compared to the same period in 2019.

April-June repairable appraisals — which would hopefully represent the worst quarter of the COVID-19 lockdown-related economy — were down 35 percent nationally over 2019, according to CCC. Third-quarter repairable appraisals were still down 20.3 percent over 2019, CCC said.

Higher severity from altered traffic patterns might have helped alleviate this loss of frequency and propped up body shop revenue. But it seems ly many shops would still meet the “down 30 percent in a quarter” criteria.

The Boyd Group reported its same-store sales had fallen 33 percent from 2019 second-quarter levels and were down 15 percent in the third quarter.

“Average shop revenues are down 25-30% across the country although it varies by region and by the intensity of regional COVID cases,” collision industry financial firm Focus Advisors wrote in August. “Most shops are slowly returning to higher volumes.

The best news – many operators have figured out how to maintain close to normal margins on dramatically reduced revenues.  The recession of 2009 taught operators how to both survive and then improve operations while under financial duress.

 Lessons well learned then are helping the best operators weather this even more extraordinary downturn.”

It’s unclear how much money would be available for the new PPP program. Cassidy’s summary describes giving the SBA $300 billion for a variety of SBA support programs, not jut the PPP loans.

The draft bill text appropriates another $120.64 billion for the PPP above the $659 billion allotted for it before. But the PPP as we knew it only gave out more than $525 billion of that $659 billion by its Aug. 8 deadline.

The draft bill also describes allocating $267.5 billion for PPP loans.

The initial PPP, which ran through Aug. 8, allowed businesses with up to 500 employees to take out the forgivable loans. Some collision industry businesses might have been down 30 percent in a quarter but have too many employees to qualify for this new round of PPP funding.

Newly released comprehensive SBA data reveals that only 10 of the 20,351 PPP loan recipients within the NAICS 811121 “Automotive Body, Paint, and Interior Repair and Maintenance” sector reported more than 300 jobs.

However, the Small Business Administration’s records also list a few thousand auto body companies which saved either zero or an unspecified number of jobs — and some of those businessees had borrowed hundreds of thousands or even millions of dollars.

However, if you throw out the blank and zero workforce examples, you still find nearly 83.4 percent (16,971 companies) of the auto body businesses who received PPP loans had 300 or fewer employees and would qualify.

The bipartisan bill also would forgive a broader range of loan expenses. The summary states that these would include “supplier costs and investments in facility modifications and personal protective equipment to operate safely.”

Finally, the bill would allow companies to deduct expenses covered by the PPP loans on one’s taxes, overriding an IRS position that viewed this to be double-dipping. (The businesses were receiving untaxable income but getting to deduct that amount in expenses as well.)

The summary called this “consistent with Congressional intent in the CARES Act.”

PPP forgiveness

PPP loans would be forgiven under BECRA with language similar to a earlier proposal supported by numerous business trade groups.

A draft of BECRA available on Cassidy’s website states that the government would generally automatically forgive PPP borrowers of up to $150,000 “if the eligible recipient submits to the lender a one-page online or paper form (from the SBA) … that attests that the eligible recipient complied with the requirements under section 7(a)(36) of the Small Business Act (15 U.S.C. 636(a)(36)).”

Essentially, fill out a 1-page form declaring your company was in compliance, and you’re forgiven.

The bill would also hold all lenders harmless for their borrowers who lied on that form.

If a body shop borrowed $150,000.01 through $2 million, the company was also excused from filing some forgiveness documentation, making life easier.

However such small businesses do need to keep “all employment records relevant to the application for loan forgiveness for the 4-year period following submission of the application.

” They also need to hang on to “all other supporting documentation relevant to the application for loan forgiveness for the 3-year period following submission of the application.”

Lender review of applications for loan forgiveness “shall be limited to whether the lender received a complete application, with all fields completed, initialed, or signed, as applicable.”

However, the SBA can still audit those loans and adjust the amount of a covered loan or forgiveness amount if it finds fraud, ineligiblility or other noncompliance.

The SBA also can audit all PPP loans regardless of size, but its enforcement of the $150,000-and-under loans is limited to instances where the borrower committed fraud or spent money on items not permitted under the PPP. In the latter case, “the Administrator may apply the standards and procedures that the Administrator would apply with respect to a loan under another paragraph of such section 7(a)” of the Small Business Act.

Be heard: Congressional contact information can be found here.

More information:

“Cassidy, Lawmakers Share Text of Bipartisan COVID-19 Emergency Relief Bills”

Sen. Bill Cassidy, Dec. 14, 2020

“Warner, Colleagues Unveil Details of Bipartisan, Bicameral COVID-19 Relief”

Sen. Mark Warner, Dec. 14, 2020

“Bipartisan COVID-19 Emergency Relief Act of 2020” summary

Sen. Bill Cassidy, Dec. 14, 2020

Repairer Driven News compilation of NAICS 811121 “Automotive Body, Paint, and Interior Repair and Maintenance” PPP data through Aug. 8, 2020


The U.S. Capitol is shown. (krblokhin/iStock)

Auto appraisal volume tracked by CCC found June 2020 repairable vehicle appraisals at 25.7 percent of June 2019 numbers. (Provided by CCC)

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New Stimulus Bill Includes Second Round of PPP Loans for Small Business and Forgiveness Rule Changes Favorable to Borrowers

Small businesses could receive second PPP loan under new proposal
December 22, 2020 5 min read Opinions expressed by Entrepreneur contributors are their own.

Congress at last passed a second stimulus bill this week — as of this writing, it is still awaiting President Trump's signature — and it includes a second round of PPP loans for affected small businesses as well as loan-forgiveness rule changes that are favorable to PPP borrowers.

The second round of PPP loans for affected small businesses are referred to as “second draw loans.” While the rules for these second draw loans are familiar, they have changed drastically from the original program, so small businesses and lenders need to get up to speed quickly on who qualifies.

In addition to providing a second draw of PPP loan funding for qualifying business, the legislation includes favorable changes to loan-forgiveness taxation and adds a simplified one-page forgiveness application for loans of $150,000 or less.

Second Draw PPP Loans

The most significant development in the legislation for small businesses is a second round of PPP loans. The new legislation allocates around $284 billion and refers to the new loans as second draw loans.

 The loan limit is $2 million, and the amount a small business will qualify for is determined by taking their average monthly payroll in 2019 and multiplying it by 2.5. In other words, the second round of PPP loans is meant to fund 2.5 months of payroll expenses.

The bill has a special calculation for restaurants and food businesses and provides those businesses a larger loan amount of 3.5 months of average monthly payroll.

So, for example, if you had an average monthly payroll in 2019 of $100,000, then your small business would qualify for $250,000. If you were a restaurant or other qualifying food business, then you would qualify for $350,000.

Related: Joel Osteen's Church Received More Than $4 Million In PPP Loans

To qualify for a second draw PPP loan, a small business must have 300 employees or less, down from the original 500 employee maximum in the first round. And a small business must have already used or plan to use their original PPP funding.

Similar to the original PPP loan program, the small business can use the loan proceeds over a period of 24 weeks and can use the funds for payroll, rent and mortgage expenses. The bill also adds some new expenses to the list of “qualifying expenses.

” These new qualifying expenses include operating expenses, workplace protection costs to protect employees from Covid and covered property damage.

25% Loss of Revenue Required to Qualify 

To qualify for a second draw loan, a small business must certify that they have had a loss of revenue of 25% or greater. This criterion is drastically different from the original qualification rules for PPP, which simply required the small business to state that economic uncertainty made the PPP loan necessary.

Under the 25% loss-of-revenue test, the small business will compare their 2020 quarterly revenue (aka, gross receipts) against their 1st, 2nd and 3rd quarters of revenue in 2019.

In order to qualify for a second draw PPP loan, a borrower must be able to show a loss in revenue of 25% or more from at least one quarter of 2020 as compared to that same quarter in 2019.

Second Draw Loans Eligible for Forgiveness Under 60% Payroll Rule

The second draw loans are forgivable but must be spent 60% on payroll costs. Since the loan amount is 2.5 months of average payroll, which is 10-11 weeks, and since the small business can use the funds over a 24-week period, it seems very ly that most small businesses will be able to use 60% of the PPP funds on payroll costs.

Original and Second Draw PPP Loans Will Not be Taxable When Forgiven

The new legislation provides that forgiven PPP loans will not be taxable to the small-business borrower. This applies to all existing PPP loans under the original CARES Act as well as the new second draw PPP loans.

Prior to the legislation, the IRS had issued guidance to small businesses saying that PPP borrowers could not expense their wages and other qualifying costs that they used their PPP funds on if they ended up getting their PPP loan forgiven.

By denying the deduction, the IRS was effectively taxing the small business for its PPP loan. This position seemed contrary to what Congress intended with the CARES Act and the original PPP legislation back in March, but it literally took an act of Congress here to correct the interpretation from the IRS.

The good news for small businesses is that borrowers can have their PPP loan forgiven and they will still be able to deduct their payroll and other qualifying expenses that they used their PPP funds on.

The legislation also states that emergency EIDL Grants and Advances, which are considered forgiven and, in most instances, do not need to be re-paid, are also not taxable to the small business borrower.  

Loans of Less than $150,000 Will Get Simplified Forgiveness Application

The legislation mandates the SBA to create a simplified PPP forgiveness application for small businesses whose PPP loans were less than $150,000.

The simplified application must fit on one page and will include loan information as well as a certification from the business owner that the funds were used properly and are eligible for forgiveness, but will not include calculations or other additional information.

The SBA already has a simplified one-page PPP forgiveness application for borrowers of $50,000 or less. It is ly that the SBA will utilize a similar application for borrowers with loans of less than $150,000. See my prior article on the simplified forgiveness application here.

Related: A Mysterious Maine Farm Got a $1.2 Million PPP Loan

Once signed into law by the President, which the White House has indicated is ly, the SBA and Treasury have been tasked with providing interpretive guidance and forms for the new forgiveness rules, as well as loan applications and guidelines for second draw PPP loan borrowers.


HEALS Act: You Could Get A Second PPP Loan Under The Next Stimulus

Small businesses could receive second PPP loan under new proposal


A new bill introduced this week would allow eligible small businesses to apply for a second Paycheck Protection Program (PPP) loan.

The legislation, part of a broader relief package backed by Senate Republicans known as the Health, Economic Assistance, Liability Protection, and Schools Act (HEALS Act), would offer a second forgivable loan to businesses that can show at least a 50% reduction in gross revenues during the pandemic.

Introduced by U.S. Sens.

Marco Rubio (R-FL) and Susan Collins (R-ME), the Continuing Small Business Recovery and Paycheck Protection Program Act looks to reform portions of the original PPP Act that small businesses criticized—including the types of expenses eligible for forgiveness—while also providing additional financial assistance to small businesses still struggling to stay afloat, both with short-term PPP loans and a new long-term recovery loan program.

“The PPP and the other small business provisions under the CARES Act have been an historic lifeline to millions of small businesses and tens of millions of American workers,” Rubio said in a press release. “Now, Congress must take action to help industries and businesses, especially minority-owned small businesses and those in low-income communities, that have been hit hard by the COVID-19 pandemic.”

The bill includes four areas of focus:

PPP Second Draw Loans

This would provide $190 billion in funding for PPP loans and PPP second draw loans, the latter expressly for those businesses that meet the U.S.

Small Business Administration revenue size standard, have no more than 300 employees and can show at least a 50% reduction in gross revenues.

The legislation also restricts businesses from receiving a second loan if it would boost their combined PPP loan amount above $10 million.

PPP Improvements

This would include expanding forgivable expenses to include:

  • Covered supplier costs, food orders for a restaurant or raw materials for a manufacturer.
  • Worker protection expenditures, including adapting the business to current needs installing partitions or a new air filtration system.
  • Operations expenditures, such as payments for business software or cloud computing services used for business operations, sales and billing functions, accounting, or tracking of supplies, inventory, records and expenses.   
  • Certain property damage, including damage, loss from looting and/or vandalism that was incurred as a result of the 2020 riots that was not covered by insurance or otherwise compensated.

Other changes to the original PPP law includes letting borrowers select their preferred eight-week period to use their PPP funds and simplifying the forgiveness application process for loans of $150,000 or less.

Small Business Growth and Domestic Production Investment Facility

This part of the legislation sets aside $10 billion to registered SBA Small Business Investment Companies (SBICs)—privately-owned companies that offer small business financing—that invest in small businesses in low-income communities, domestic supply chain manufacturers and businesses with significant COVID-19-related revenue losses. 

Guidelines for SBA Loans to Recovery Sector Businesses

This would allocate $100 billion in long-term, low-cost loans to eligible “recovery sectors” of the economy, which are defined to include rural, low-income and eligible seasonal businesses. Allowable loan uses include working capital, acquisition of fixed assets and refinancing existing debt. Loans would be for up to 20 years at 1% interest.   

How This Bill Could Help the Smallest Businesses

Supporters of the bill say it’s the missing piece that the smallest and most disadvantaged businesses were lacking in the original Coronavirus Aid, Relief, And Economic Security (CARES) Act.

“The separate low-interest, long-term ‘recovery’ loan program established in the package could very well be the true Main Street lending program that the Federal Reserve seems to have missed,” Karen Kerrigan, president and CEO of the Small Business & Entrepreneurship Council, said in a press release. “This program will help a diverse range of small businesses in low-income areas by offering favorable terms, and allow for a broad usage of loan funds, including working capital and refinancing of existing debt.”

The smallest businesses have been hit particularly hard by the pandemic compared to their larger peers. According to a May 2020 report by the Small Business Association’s Office of Advocacy, employers who had 20 to 49 employees suffered the largest percentage of job losses, with employment declining 21.5%. By comparison, businesses with 1,000 or more employees saw a decline of 13.3%.

Some say although the Continuing Small Business Recovery and Paycheck Protection Program Act is a step in the right direction, it still doesn’t do enough to help those who need it the most, particularly minority-owned businesses as well as those with relatively limited financial resources who are disproportionately affected by the pandemic. A June 2020 study by management consulting firm McKinsey & Co. found that minority-owned businesses and business owners with only a high school degree or less were among the most vulnerable sectors. 

“While the Rubio-Collins bill begins to take a longer view of the economic impacts small businesses are struggling with, their PPP expansion and new program are not the right vehicle for getting support to underbanked small businesses,” Amanda Ballantyne, executive director at The Main Street Alliance, a small business advocacy group, wrote in an email to Forbes Advisor. “A bigger expansion of the Employee Retention Tax Credit (ERTC), and easing ERTC access is a better, more equitable route to achieve the dual goals of maintaining employment and sustaining small businesses.”


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