Is your business eligible for a second round of PPP funding?

PPP can be confusing so NHADA Silver Partner Albin, Randall and Bennett provided important insight that your shop can benefit from.

The latest Covid-19 Relief Package includes another round of PPP support. PPP can be confusing so NHADA Silver Partner Albin, Randall and Bennett provided important insight that your shop can benefit from. The excerpt below is directly from our Partner Albin, Randall and Bennett. View their entire analysis of the Covid-19 Relief Package here.

From Partner Albin, Randall and Bennett:

Recently, Bart Haag and Holly Ferguson of Albin Randall and Bennett had a discussion regarding the second round of PPP. During this discussion they debated whether or not a business would be eligible for a second round of PPP funding. They concluded that the first two tests are objective and simply math questions. In other words:

  • Did you have a reduction in sales greater than 25% during the 1st, 2nd or 3rd quarter of 2020 when compared with the same quarter in 2019 and;
  • Do you have fewer than 300 employees?

The third test is more subjective. The business has to certify that the loan is necessary to support their ongoing operations due to economic uncertainty and the proceeds will be used to keep people employed.

Because it is more subjective it is harder to prove. In the case of many dealers and other business owners they possibly had a down 1st quarter, but after that they set record after record and most likely finished the year strong and profitable.

Therefore, Bart Haag and Holly Ferguson concluded business owners should proceed cautiously since they possibly can’t pass the third test affirmatively. 

That doesn’t mean; however, the answer couldn’t change at the end of the first quarter of 2021. As long as funding remains and the program is open a business can always apply for a PPP2 loan later. The following is a note from NADA that was sent to all state associations supporting this conclusion.

Provisions Related to Paycheck Protection Program (PPP) Loans

  • Creates a second round of PPP loans, but restricts eligibility. Key changes applicable to the new PPP include:
    • Reducing the maximum loan amount that may be applied for from $10 million to $2 million;
    • Lowering the maximum per applicant employee limit from 500 to 300; and
    • Imposing a new requirement to demonstrate at least a 25% reduction in gross receipts in the first, second or third quarter of 2020 relative to same quarter in 2019.

Additionally, like the first round of PPP loans, any new PPP loan application submitted in the second round will require the applicant to certify that the loan is necessary to support ongoing business operations in light of the uncertainty of current economic conditions.

Importantly, the applicant’s certification for its prior PPP loan will not apply for the new application. Instead, applicants must make a new certification based on the economic circumstances and market conditions that exist at the time they apply for the new PPP loan, and not those that existed in the Spring of 2020. This effectively means making a good faith determination that, but for the new PPP loan, the applicant would be unable to keep staff on payroll. Dealers should consult with their attorneys and accountants prior to applying for a new PPP loan.

Albin, Randall & Bennett has developed a PPP Loan forgiveness tool, a robust planning tool for loan forgiveness that may help your business with planning. Please note, it is a “Planning Tool” and not a “Precision Tool.”