A guide to leveraging PPP2 Loans

A Startup Guide to Utilizing PPP2 Loans


The Paycheck Protection Program (PPP) has provided relief to businesses impacted by the economic fallout of the COVID-19 pandemic. 

As of January 2021, Second Draw PPP (PP2) Loans have been introduced by the Biden Administration to provide further invaluable aid to startups struggling through the pandemic. If you are a small business owner unfamiliar with the PPP program or this newest version, read on. We’ll help you understand how you can take advantage of this program to keep your employees on Payroll and the lights on.

What are PPP2 Loans? 

PPP2 loans are government-sponsored loans designed to help small businesses weather the COVID-19 pandemic. These loans are intended to be entirely forgivable if specific guidelines are followed within a lenient timeline. These paycheck protection loans can be for up to a maximum loan amount of $2 million, with the precise amount of money dependant on the Business in question. There have also been some updates to the PPP loan requirements. 

Currently, small businesses are eligible for the new PPP2 if:

  • They Have Less than 300 Employees
  • Can Show They Have A 25% Reduction in Revenue From the Same Quarter in the Previous Year
  • Your Business was opened previous to February 25th, 2020, and is still operational
  • You do not have remaining unused funds from an earlier PPP Loan 

What Are The Terms of PPP2 Loans?

You may be wondering how much money your startup could get from the PPP2 loans. Right now, any business may receive a PPP2 loan of up to 2.5x the monthly average payroll costs of the 12 months before getting the loan or in the previous calendar year. This amount can go as high as the $2 million limits mentioned before, which decreases from the previous $10,000,000 limit set for the original PPP.

What Can I Use PPP2 Loans On? 

The money earned from PPP2 loans can be used on operating expenses as well as payroll expenses - this now includes employee insurance. It also covers any property damage caused by public disturbances in 2020 that were not covered by your insurance. It also covers any expenditures that your Business needed to make to adapt to COVID-19, such as purchasing personal protective equipment (PPE), implementing new standards of sanitation, or accomodating social distancing. No less than 60% of the earned funds can be spent on Payroll. PPP2 loans are also now tax-deductible. 

How Do I Get Forgiveness For PPP2?

PP2 loans are also eligible for PPP loan forgiveness. Any loan of up to $150,000 is automatically eligible for forgiveness by merely filling out your forgiveness application. For larger loans, you have to make sure that your Business followed the terms for how the loan should be used, including the requirement that 60% of the loan be spent on Payroll. You also need to make sure that the expenses are used within the covered period, a maximum of 24 weeks. 

You must also show that you maintained your employee base and rehired employees let go due to COVID (not any other reasons) and that you maintained a payroll level of at least 75% of pre-COVID levels. Reducing the amount spent on Payroll or salaries will result in the amount that can be forgiven being decreased.

You will need supporting documentation to support your forgiveness application, so it’s important to keep meticulous records.

Now is The Time to Leverage PPP Loans

If you’re considering applying for PPP Loans, now is the time. The program is only running for a limited time, and the forgiveness terms are generous. That being said, it can help to have a financial partner in your corner to help you manage and document your expenses to achieve full forgiveness. 

At Punch Financial, we specialize in providing high-growth companies with a modern accounting experience. Instead of hiring an accounting and bookkeeping team at great expense, you can outsource your financial back-end to a firm with proven results for a fraction of the cost. Each account is assigned a staff accountant, a Director, and a CFO.

Our mission is to help you streamline your back-office and provide you with actionable data to make you a more-prepared business owner. Let’s connect to give you a customized quote and free consultation. You have nothing to lose but so much to gain.

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