Expansion of Definition of Eligible Costs
The new bill had widened the net of cost eligible for Paycheck Protection Program (PPP) loan forgiveness. In addition to payroll, rent, covered mortgage interest and utilities, the following costs are also potentially forgivable:
- Covered worker protection and facility modification expenditures, including personal protective equipment, to comply with COVID-19 federal health and safety guidelines.
- Expenditures to suppliers that are essential at the time of purchase to the recipient’s current operations.
- Covered operating costs such as software and cloud computing services and accounting needs.
The covered period to spend the PPP loan on allowed expenses is the same as the old bill, which is either 8 weeks or 24 weeks. Borrowers will have to spend at least 60% of the loan amount on the payroll over the covered period in order to be eligible for loan forgiveness.
The calculation of the maximum loan amount that can be applied in the second round of PPP is the same, which is 2.5 times of the average monthly payroll in the year prior to the loan or the calendar year. However, PPP borrowers with NAICS codes starting from 72 (Hotels & restaurants) can get up to 3.5 times of their average monthly payroll costs.
The maximum amount of loan that can be applied has been cut from $10 million in the first round to a $2 million maximum.
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