House Passes Bill Extending the PPP Deadline
The House of Representatives have overwhelming approved a bill that would extend the deadline for filing an application with the Paycheck Protection Program (PPP) until May 31, 2021. It appears that the Senate will take up this bill next week and the chances of it passing appear to be very good.
If this bill become law it will allow family child care providers an extra 60 days to apply for the PPP. This is good news! This will allow providers who have not yet completed their 2020 tax return to use their gross income from 2020 when applying for the PPP. You can apply using either your 2019 or 2020 gross income, whichever is higher.
What is the PPP?
The PPP is a forgivable loan program to help small business cope with the financial losses due to COVID-19. Apply for this program through your local bank or online lenders. Here's a link to some online lenders. Once you submit your application, you will have 8-24 weeks to spend the money. You can ask for forgiveness 8 weeks after you spend the money. You can spend the money on payroll for yourself, utilities, mortgage loan interest, food, transportation and Covid supplies. You don't need to have employees to apply.
Will my loan be forgiven?
Yes! Your lender will have you fill out a simple forgiveness form. Don't worry that you won't get forgiveness! 98% of businesses that apply for forgiveness receive it! You won't have to pay back this money.
Why should I apply for the PPP?
I strongly urge family child care providers to apply for the PPP. The money you receive is not taxable income. (Note: it may be taxable income on your state income taxes.) You can get a lot of money from this program that can help your business and your family. If your gross income was $70,000, you can receive $14,583! You don't have to report this as income on your taxes.
What can you do if you have already applied for the PPP, but used your net income (profit) instead of your gross income?
A recent SBA rule allows you to apply using your gross income, not net income. Since your gross income is much larger than your net income, you want to get the benefit of of using your gross income. If you applied using your net income and haven't yet received the money in your bank account, immediately contact your lender to ask that your application either be revised or withdrawn. The SBA rules allow for this, so push your lender to act on your behalf. If you have already received PPP money in your bank account, you cannot apply for the difference in what you would have gotten had you applied using your gross income.
Will this extended deadline affect my ability to apply for the Second Draw PPP?
Maybe. You are only eligible for the Second Draw PPP if you have previously received PPP money. If you did receive money from the PPP, you must wait at least 8 weeks after receiving the money in your bank account before you can apply for the Second Draw PPP. Assuming this new law is passed, you will have had to first received money by April 5th to qualify.
Update: In the above paragraph I said you must wait 8 weeks before applying for the Second Draw. That is misleading. You can apply for the Second Draw before 8 weeks, but you must have spent the money from the First Draw before you can accept money from the Second Draw. Some lenders are processing Second Draw applications so fast that providers are receiving money within 8 weeks. This shouldn't happen. If it does, contact your lender to try to fix this.
I will be updating information about the PPP if this new law is passed.
Tom Copeland - www.tomcopelandblog.com
Image credit: Small Business Administration
