With the signing of the $900 billion U.S. Coronavirus relief bill over the holidays, a new pot of $285 billion for the Paycheck Protection Program has been approved, making new loans available to small businesses impacted by the Covid pandemic.

The forgivable loans are available through banks to small businesses that had a sales decline of 25% or more from the previous year for Q2, Q3, or Q4 2020.  As was the case with the first round of PPP loans, amounts can be for up to 2.5 months of average 2019 payroll costs (including benefits). If the business spends the money on approved expenses (from a broader list than the first round) in either an eight or 24-week period, the loan can be totally forgiven. The forgiveness process has also been streamlined.

There’s a couple of pieces of good news in the bill for companies that received PPP loans in the first round.  One is that businesses can have a second bite of the apple, based on the new sales decline criteria, even if they received a PPP loan in the first round.  And a change to the tax treatment of the first round allows companies to deduct the expenses that were paid for with PPP money even though the forgiven PPP loan was already to be excluded from income for tax purposes.

Changes to the criteria for the businesses that can apply mean that PPP funds for the second round should go further, but the amount approved by Congress is also smaller than the first round, so there’s likely to be a rush as soon as banks begin taking applications. A change in the structure of compensation for banks means that they no longer have an incentive to process the largest loans first, which may help make more money available to smaller businesses.  Hopefully the rollout of the application process by banks will be smoother than the first time around, which was marred by problems (see "Federal Programs for Small Businesses Run Out of Money").

There’s a good summary of the rules for the new PPP loans at USA Today.