As of today official SBA PPP FAQ still has following Answer:
14. Question: What time period should borrowers use to determine their number of employees and payroll costs to calculate their maximum loan amounts?
Answer: In general, borrowers can calculate their aggregate payroll costs using data either from the previous 12 months or from calendar year 2019. For seasonal businesses, the applicant may use average monthly payroll for the period between February 15, 2019, or March 1, 2019, and June 30, 2019. An applicant that was not in business from February 15, 2019 to June 30, 2019 may use the average monthly payroll costs for the period January 1, 2020 through February 29, 2020. Borrowers may use their average employment over the same time periods to determine their number of employees, for the purposes of applying an employee-based size standard. Alternatively, borrowers may elect to use SBA’s usual calculation: the average number of employees per pay period in the 12 completed calendar months prior to the date of the loan application (or the average number of employees for each of the pay periods that the business has been operational, if it has not been operational for 12 months).
However, Square Capital escalation manager just told me that for PPP 2.0 I have to use whole 2020 tax year for average payroll cost calculations and that I can't use the 2 month period like I did for PPP 1.0. This has VERY NEGATIVE impact for businesses like mine that were established after January 1st, 2020 as I will be getting almost 4x less in PPP 2.0 loan than I received in first round.
This problem is especially compounded in California, because:
- California had strict shutdown rules and it was impossible for newly established businesses to ramp up payroll for 2020.
- AB-5 that became effective on January 1st, 2020 forced many sole proprietors who used SSN all the time to apply for an EIN and required them to run payroll beginning January 1st, 2020 after converting 1099 workers into w-2 employees. Now every business owner that became compliant with AB-5 is getting very unfavorable PPP 2.0 loan terms as for PPP 2.0 such business owners essentially have to use January 1st, 2020 to February 29th, 2020 payroll costs and divide by 12 months.
- In addition, "thanks" to AB-5 many 1099-MISC workers became ineligible for PPP themselves as they were not in business on February 15th, 2020 as self employed. Of course if they did not lie on certification.
In addition Square Capital with their application is making me feel like a criminal because to become eligible for PPP 2.0 I have to certify that I as business owner Can demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020
How can I even certify anything like that if my business was not even open in 2019? Technically gross receipts for 2019 were $0 and for 2020 it is positive number. So my gross receipts increased by infinity in 2020 compared to 2019.
It seems that someone has dropped the ball here - either it is SBA+Congress by coming up with half baked rules. Or it is Square Capital that interprets PPP 2.0 rules unfavorably for its own customers.
