PPP Round 2 Approved

The Paycheck Protection Program – PPP Round 2 has been approved by Congress.

On Tuesday, April 21st, Congress amended the CARES Act to allow for an additional $310 billion to go to small business owners. If you missed out on the first round of funding, take notice. It is not too late to apply and you can still get a forgivable loan in Paycheck Protection Program PPP Round 2.

PPP Round 1: Scandals?

Round 1 of PPP funds largely went to “big” small businesses. Notably, corporations with W2 employees received a big chunk of funds. There were even scandals of large publicly traded corporations who were awarded funds.

In particular, Shake Shack made the news for getting $10 million in funds they later gave back. Shake Shack (SHAK), a publicly traded company, has 6,000 total employees. According to PPP Provisions, they should never have gotten the funds. Their argument? Each location operates independently and has an average of 45 employees. So, they applied and received $10 million. Due to public outcry, they gave the money back after conveniently “finding” $10 million they could use to keep the operation afloat.

This is a challenging situation for everyone. Restaurants around the country are being hit extremely hard. Restaurants employ anywhere from 11-15 million Americans. Simply ignoring them and not providing relief is not an option. But, a large publicly traded restaurant certainly has different access to resources than your favorite local family-owned dive. Giving money to the “big guys” inevitably takes money away from the little guys in situations like these. Data reveals 71 publicly traded companies received PPP money before the first round of funding ran out. Many hope PPP Round 2 will be different.

PPP Round 2: More Guidance

To help even the playing field, somethings are different in PPP Round 2:

• Business owners must certify they can’t get funding from any other source
• Public companies are unlikely to get funds since they have both cash (public shares) and access to capital markets (investment banks)
• $60 billion of the total $310 billion in PPP Round 2 will be for small businesses without existing banking relationships

Hopefully, this will allow smaller businesses to get their piece of the pie of these forgivable loans. One complaint is the certain big banks wouldn’t even accept applications for small businesses if they didn’t already have a business banking account established. In PPP Round 2, many small business owners expect this to increase their chances of getting funded.

Sole Proprietors and Independent Contractors

The goal of the PPP Loan is to provide funding to cover 2 months of payroll during the Coronavirus pandemic. Lawmakers hope this will reduce the amount of people claiming unemployment. As of this writing, some economist believe unemployment is close to 20% with a total of 26 million unemployment claims since the beginning of the COVID-19 pandemic and its related financial crisis.

One critique of the first round of funding is that businesses with W2 employees were given priority in applying. Many believe this caused smaller businesses like single-member LLCs, sole proprietors and independent contractors to lose the opportunity to get their funding. PPP Round 2 doesn’t have those same restrictions. This means more sole proprietors can apply right away.

This Affects Solo 401k Owners

If you have a Solo 401k plan, PPP Round 2 directly affects you. To qualify for the Solo 401k, you must have a business. However, that business can’t have any full-time W2 employees other than you and your spouse. If you have a corporation where you are your own W2 employee, perhaps you got funded in PPP Round 1.

However, if you are a single-member LLC or sole proprietor, maybe you missed out. Fortunately, PPP Round 2 gives small business owners another chance. Even if you don’t have a pre-existing business banking relationship, you can apply for PPP Round 2. Contact your local bank or credit union right away. Ask if they are offering PPP loans for small business owners. If so, you might have a better chance of getting your loan funded.

These are challenging time for sure. But, small business owners are resilient. You are capable, resourceful, and strong. You will get through this.

There are Solo 401k loan and distribution provisions to help you during the crisis. If you need to access your retirement funds during the Coronavirus pandemic, click here to read more about how you can.