PPP loans could make comeback in time for holidays

Bankers, CPAs stand by for potential $300B PPP round

Published December 14, 2020 by Sydney Lake

Congress could pass a third round of the U.S. Small Business Administration’s Paycheck Protection Program funding just in time for the holidays.

A bipartisan group of U.S. senators on Monday introduced a $908 billion coronavirus relief bill, including an estimated $300 billion set aside for another round of PPP funding. In April, the first $349 billion round of PPP funding was depleted in less than two weeks.

“It’s possible that PPP will be addressed in the omnibus budget bill that will presumably pass by this Friday,” says Virginia Bankers Association CEO and President Bruce Whitehurst. “From the bank’s perspective, bankers are in the same place as small business owners and all of us waiting to see what Congress will or will not do.”

An additional $320 billion round of PPP funding was passed shortly after the first April round, but it took longer to run out in light of controversies that erupted over larger corporations receiving funds intended for small businesses. Messages from the U.S. Department of the Treasury encouraging only businesses that really needed the money to apply also contributed to the slower round, Whitehurst says.

“We do have this great sense that there’s going to be some type of significant relief in the near future, and it sure seems like it’s necessary,” says Gary Thomson, managing partner of Richmond-based Thomson Consulting LLC and former chairman of the board of the Virginia Society of Certified Public Accountants.

Other funding would include unemployment assistance, local and state government support, as well as transportation and health care funding. Approximately 113,000 small businesses (including Virginia Business Media LLC) received funding in Virginia from the federal relief program intended to assist small businesses meet payroll costs and make mortgage interest, rent and/or utilities payments amid the economic crisis caused by the COVID-19 pandemic.

The new legislation is expected to be released in two pieces, according to Monday reports, with $748 billion set aside for unemployment insurance, small business aid and health care funding. The remaining $160 billion would go to state and local aid.

Expected differences for this round of PPP funding include an opportunity for businesses that have already received PPP funding to apply again, and the bill appears to have language that would allow for the deductibility of business expenses that are paid with the proceeds from PPP loans, says Ryan Losi, executive vice president of CPA firm Piascik.

“If that’s the case, well, then not only is it obviously helpful for those who take round three PPP loans who qualify, but also I presume it’s also a fix for those who took PPP proceeds in round one and two earlier this year,” Losi says.

The catch, however, is that businesses that are again applying for funding must show at least a 30% drop in revenue during one of the quarters of 2020. According to Losi’s expectations for the potential new funding, if a company can’t show a decrease in revenue, it won’t qualify for this round.

“That’s going to eliminate a lot of businesses that have basically been able to sustain, or have even prospered, during this time,” Losi says.

Other potential changes for this round could include industry-specific funding for businesses still especially struggling (such as tourism and hospitality businesses) and the option for organizations such as chambers of commerce and trade associations to apply.

“We believe the federal government learned a lot about industries that were affected,” Thomson says. “There is this sense that they want to look out for even smaller companies.”

It still remains unknown what demand may look like for this next round of PPP funding, but CPAs and bankers are prepared for a potential round of funding during the holiday season. They do, however, encourage businesses interested in funding to start working with their bankers and CPAs now to have any and all likely documentation prepared ahead of time. It remains unclear whether there will be any changes to requested documentation for this potential new round of funding.

“There was a point where this thing turned and became efficient,” Thomson says of the first round of PPP funding, which was met with backlogs and technical difficulties, among other roadblocks. “I would certainly expect that everyone involved whether it be the federal government, banks, clients and others learned a lot from that.”

Thomson encourages businesses to consider whether the funding is necessary and how many people they are planning on keeping on the payroll.

“It’s a good time to do business planning,” he says.

Whitehurst agrees that this round could take flight more smoothly after the first round was “like building an airplane while it was on takeoff.”

“Banks are standing by and waiting to see what comes forward,” he says. “And they’re ready.”