PPP Updates

A second round of PPP funding, a $900 billion COVID-19 relief bill, was approved by Congress and signed into law on Dec. 27.

The initial Payroll Protection Program provided $525 billion in forgivable loans during the pandemic before halting applications in August.

The Economic Aid Act resumed PPP funding (or PPP2, as some call it) with many of the same parameters as the first program but there are several important differences from the original PPP to note.

Second-Draw PPP Loans

• Businesses are eligible for a second PPP loan up to $2 million, provided they have:
  • 300 employees or less
  • Have used or will use the full amount of their first PPP loan on or prior to the expected date for the second PPP load to be distributed to the borrower.
  • A qualifying event – showing a 25% gross revenue decline in any 2020 quarter (as compared to the same quarter in 2019). A provision was added for borrowers who had operations for all calendar quarters in 2019. Submit both the 2019 and 2020 annual tax forms showing the gross receipts reduction of 25% or greater.
  • Information from SBA on second-draw PPP loans.

First-Draw PPP Loans

• New PPP loans are available to first-time borrowers:
  • Businesses with 500 or fewer employees that are eligible for other SBA 7(a) loans.
  • Sole proprietors, independent contractors, and eligible self-employed individuals.
  • Nonprofits, including churches.
  • Accommodation and food services operations (those with North American Industry Classification System (NAICS) codes starting with 72) with fewer than 500 employees per physical location.
  • Section 501(c)(6) business leagues, such as Chambers of Commerce, visitors’ bureaus, etc., as well as housing cooperatives and “destination marketing organizations” that have 300 or fewer employees and do not receive more than 15% of receipts from lobbying. Sports leagues are not eligible.
  • Information from SBA on first-draw PPP loans.

Borrowers who returned all or part of a previous PPP loan are eligible to reapply for the maximum amount available to them.

PPP Loan Amounts

• Payroll: The maximum allowed for both first- and second-draw PPP loans remains at 2.5 times the organization’s average monthly payroll (in 2019, 2020 or the year prior to the loan), though some eligible businesses (borrowers with NAICS codes starting with 72 such as hotels and restaurants) may receive up to 3.5 times their average monthly payroll. The maximum for first-draw PPP loans is $10 million (same as original PPP).
• Eligible Costs: In addition to the original definition of “eligible costs” for the purpose of PPP loan usage, PPP loans from the second round of funding can be used to cover worker protection and facility modification expenditures, including personal protective equipment, to comply with COVID-19 federal health and safety guidelines. Also covered – worker protection and facility modification expenditures, including personal protective equipment, to comply with COVID-19 federal health and safety guidelines.
• Provisions for Minority, Underserved, Veteran and Women-Owned Businesses: The Economic Aid Act includes specific provisions for PPP applicants to ensure increased access and opportunity for minority, underserved, veteran, and women-owned businesses. This includes certain amounts of PPP loans set aside for these groups and other commitments by the SBA to ensure that businesses in these categories are served through the PPP program.
• Seasonal Businesses: The Applicant may elect to instead use average total monthly payroll for any twelve-week period selected by the Applicant between February 15, 2019 and February 15, 2020, excluding costs over $100,000 on an annualized basis, as prorated for the period during which the payments are made or the obligation to make the payments is incurred, for each employee.

PPP Timeline

• January 11, 2021 – PPP resumes. Applications for first-draw PPP loans can be submitted by community financial institutions.
• January 13, 2021 – Applications for second-draw PPP loans can be submitted by community financial institutions.
• TBA – Applications for first- and second-draw PPP loans can be submitted by all participating lenders.
• March 31, 2021 – The second PPP application window closes to new borrowers and certain existing PPP borrowers for a first or second draw PPP loan.

PPP Application
PPP Borrower Application Form (revised 1.8.2021).pdf (sba.gov)

For additional information, please visit: https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program