In response to the coronavirus pandemic, the coronavirus financial relief package that Congress passed on March 27, 2020, took shape in the form of the Coronavirus Aid, Relief, and Economic Security (CARES) Act which was the largest economic bill in the history of the United States.
The various economic measures stipulated in the bill Act to provide financial assistance to individuals and businesses hit by the pandemic explains William D King.
All programs included in the CARES Act had limited validity to make changes to suit the new situations evolving during the fight against the pandemic.
As the year ended in December 2020, the government felt the need to continue with several programs created in the CARES Act.
The President signed the Consolidated Appropriations Act (CAA) 2021 on December 27, 2020, which became a law. The CAA reopened several programs of the CARES Act and established several new programs for businesses and individuals.
A second draw borrower more likely than not encountered an income decrease of 25% or more prominent in 2020 compared with 2019.
This income decrease might be determined by looking at the borrower’s quarterly gross receipts for any quarter in 2020 with the borrower’s gross receipts for the relating quarter of 2019.
In the event that a borrower was not in business for specific quarters of 2019, any quarter of 2020 might be contrasted with any quarter of 2019 in which the borrower was ready to go.
In the event that the borrower was not in business at all during 2019, but rather was in procedure on February 15, 2020, then, at that point, it might think about the second, third, or final quarter for 2020 to the primary quarter of 2020.
On the off chance that a subsequent draw advance candidate has a first draw credit that is under survey by SBA, then, at that point, the bank, when it presents an application for insurance of the subsequent draw advance, will be informed by the SBA that it won’t get an SBA advance number until the primary draw advance issue is settled. The Second Draw Rule expresses that SBA will settle issues identified with annoying borrowers “speedily.”
According to the SBA and Treasury, the technique is thusly expected to keep extra advances from being made to unsettled borrowers, however without excluding a qualified unsettled borrower from getting a subsequent draw advance if such issues are settled in the borrower’s approval.
This article addresses the Second Draw loans and the Paycheck Protection Program (PPP) in the context of the CAA.
William D King explains the Paycheck Protection Program
The Small Business Administration was responsible for implementing the Paycheck Protection Program (PPP) with support from the Treasury Department. Initially, the program provided funds for small businesses to cover the cost of payroll together with benefits for 8 weeks. Small businesses could use the funds for paying rent, utilities, and mortgages. You can use the money for supplier costs like cost of goods, operations expenditures, and worker protection expenditures to remain Covid19 compliant.
Also, the PPP authorizes up to $659 billion toward job retention plus other expenses, which should benefit millions of Americans employed by small businesses. Besides small businesses, eligible Veterans organizations, nonprofit organizations, Tribal Organizations included in the Small Business Act, and independent contractors and self-employed individuals are eligible if they meet the standards of the program size.
Highlights of PPP loan
Initially, PPP loans were unsecured loans with tenure of 2 years and carried an interest rate of 1%, but the length of the loan is 5 years for loans made after June 5, 2020, explains William D King. The loan amount is equivalent to expenses for 24 weeks from the disbursement date, and the loan payment can start after 10 months of the end of the 24-week cover or processing of your forgiveness application. If forgiven, the loan turns into a non-taxable grant.
Eligibility for second draw PPP loan
The eligibility criteria for second draw PPP loans are the same as earlier. Still, to get the loan in the second draw, applicants need to confirm that the total amount of the first loan has been expended. Moreover, businesses with a NAICS code beginning with 72 and employing less than 300 employees per business location are eligible for the second PPP loan. However, news organizations with more than one physical location are eligible for the loan.
In addition, businesses must ensure that the reduction in gross receipts should be at least 25% in at least 3 quarters of 2020 compared to the same period in 2019.