Stretch Your PPP-2 Funding with Cloud Software UpgradesFebruary 24, 2021
Small businesses must apply for PPP-2 Loans by May 31, 2021 and can use funds toward payroll and non-payroll expenses, including HR technology.
On January 11, 2021, the Small Business Administration (SBA) reopened the Paycheck Protection Program (PPP) program with updated eligibility requirements and the possibility of a second loan for hardest-hit small businesses. The new guidelines make it easier for businesses to obtain a first-draw PPP loan and even a second-draw loan to be used for eligible payroll and non-payroll expenses, including technology needs. Software and cloud upgrades, for example, are recognized as critical expenses for companies struggling in this new environment, potentially including payroll and HCM software to digitize operations and support touchless, mobile-friendly workforce solutions.
PPP Background: A Refresher
With the pandemic continuing to force closures and restricted operations, businesses are looking for every possible way to stretch resources. As of February 15, 2021, more than 6 million PPP loans had been approved, providing $648 billion in relief. More than 97,966 businesses have permanently closed during the pandemic, and small businesses have absorbed the brunt of the impact from the pandemic, particularly in the leisure and hospitality sector.
Small businesses with fewer than 500 employees account for more than 99% of all U.S. businesses and employ roughly half the country’s workforce. Unemployment during the pandemic peaked in April 2020 at 14.8% and remained at a still-elevated 6.7% at the end of the year. With support from the Department of Treasury, the SBA originally began providing funds via the PPP program in March 2020 as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. In December 2020, the Consolidated Appropriations Act of 2021 (CAA) was signed into law, providing an additional $284 billion in funding, referred to as PPP-2.
The Role of Technology During COVID
With so much of the workforce working remotely and the upending of business operations to limit contact, many procedures had to be reimagined. In every industry, even the most low-tech businesses have taken manual and paper-based procedures digital, from timecards, submitting receipts for reimbursement, manual paycheck delivery, tracking time-off requests, and even taking orders from customers. According to a new McKinsey Global Survey, “companies have accelerated the digitization of their customer and supply-chain interactions and of their internal operations by three to four years.”
This investment is seen as an enduring investment that will keep companies ready to roll with changes in response to crises as well as evolving customer and employee demands as interactions move more and more to the digital space. Cloud solutions offer key benefits for small businesses — like scalability, flexibility, cost, innovation, maintenance, and security — that are critical in times like these and beyond.
PPP-2 funds can be used for both payroll and non-payroll expenses, including payroll costs; mortgage, rental, and utility payments; covered supplier costs; covered worker protection expenditures; covered property damage costs; and covered operations expenditures, which includes payments for business software or cloud computing.
According to the SBA, the following entities are eligible to apply for a First Draw PPP Loans through the latest wave of funding:
- Sole proprietors, independent contractors, and self-employed persons
- Any small business concern that meets SBA’s size standards (either the industry size standard or the alternative size standard)
- Any business, 501(c)(3) non-profit organization, 501(c)(19) veterans organization, or tribal business concern (sec. 31(b)(2)(C) of the Small Business Act) with the greater of:
- 500 employees
- That meets the SBA industry size standard if more than 500
- Any business with a NAICS code that begins with 72 (Accommodations and Food Services) that has more than one physical location and employs less than 500 per location
To be eligible for a Second Draw PPP Loan, borrowers must meet these requirements:
- Previously received a First Draw PPP Loan and will or has used the full amount only for authorized uses
- Has no more than 300 employees
- Can demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020
What You Can Do Now
The deadline for PPP-2 loans is May 31, 2021, and Paylocity is with our clients every step of the way. From helping you stay up-to-date on changing state and federal legislation to resources and product updates to help make your job easier. We’re the partner you need and deserve to tackle the challenges of today so you focus on what’s most important — your people. Speak to a solutions expert to learn how our intuitive, cloud-based HR and payroll platform can set you up for resilience and success today and well beyond tomorrow with tailored-right-sized solutions.
This information is provided as a courtesy, may change, and is not intended as legal or tax guidance. Employers with questions or concerns outside the scope of a Payroll Service Provider are encouraged to seek the advice of a qualified CPA, Tax Attorney, or Advisor.
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