Now that the initial rounds of COVID vaccines are being administered and new COVID relief has become law, there is light at the end of the tunnel for struggling preschools and child care centers. What should you know about the Paycheck Protection Program as you plan your re-opening, or scaling-up strategy?
$284 billion in aid through PPP loans is now available
Late last month, a $900 billion COVID-19 relief package was signed into law. This relief bill contained $284 billion in funding for another round of Paycheck Protection Program (PPP) loans.
During the first round of PPP funding, back in April, the loans were targeted to incent companies to keep employees on the payroll. Not only would this keep companies operating, but employees would get to keep their insurance and avoid overwhelming the unemployment system. Although this worked well for some companies, restrictions placed on the loans left others — including many preschools and childcare centers with significant non-payroll related costs — out in the cold. Those that were able to benefit found that the shutdown and enrollment restrictions lasted far longer than anticipated, and the initial loan amounts were quickly exhausted.
Who is eligible to apply?
The new round of loans are available for first-time borrowers as well as businesses that had previously received a PPP loan.
For first-time borrowers, eligibility applies to the following groups:
- Businesses with 500 or fewer employees
- Sole proprietors, individual contractors, and eligible self-employed individuals
- Non-profits, including churches
- Accommodation and food services operations with fewer than 300 employees
Businesses that have previously received a loan may be eligible when meeting the following criteria:
- Have 300 or fewer employees
- Have used or will use the full amount of their first PPP loan
- Can show a 25% decline in revenue in any quarter of 2020 compared to the same quarter the year before1
Adjusted PPP loan terms
Loan forgiveness and tax deductibility
For borrowers to be fully forgiven for any PPP loan they receive, the business must spend no less than 60% of the funds on payroll over the covered loan period of 8 - 24 weeks. The new bill includes a simplified 1-page loan forgiveness application for loans up to $150,000. This change does retroactively apply to any existing PPP loan.1
All business expenses payed for by PPP funding are tax deductible and forgiven loans are tax exempt.
Eligible businesses are able to apply for loans January 11 through March 31, 2021. If you are a child care center or preschool planning your re-opening strategy, make sure that you secure your loan before funds run out.
- Drew, J. (2020, December 22). COVID-19 relief bill addresses key PPP issues. Retrieved January 06, 2021, from https://www.journalofaccountancy.com/news/2020/dec/covid-19-relief-bill-addresses-key-ppp-issues.html
Smart Lunches is the smart solution for preschool, child care, and adult day care centers from Massachusetts to Virginia. Smart Lunches offers delicious lunch as well as breakfast and snacks that are prepared off-site and delivered fresh daily. We monitor all state and CDC regulations and guidelines and optimize our operations to provide safe, worry-free meals.