On Wednesday, January 6, the U.S. Small Business Administration (SBA) and the Treasury issued joint guidance regarding the latest updates to the Paycheck Protection Program (PPP), as amended by the recent COVID-19 relief bill. A recent article from the Journal of Accountancy offers an overview of the guidance, which includes the following items:
- An interim final rule titled, “Business Loan Program Temporary Changes; Paycheck Protection Program as Amended” – This document includes a consolidation of PPP rules for borrowers using the program for the first time. It also gives an explanation of program changes made by the recent COVID-19 relief legislation. Click here to read the document in full.
- An interim final rule titled, “Business Loan Program Temporary Changes; Paycheck Protection Program Second Draw Loans” – This document covers the various regulations for businesses that received PPP loans through the initial program and now want to pursue a second-draw loan. Click here to read the document in full.
- Additional guidance titled, “Guidance on Accessing Capital for Minority, Underserved, Veteran and Women-Owned Business Concerns” – This document gives details on the SBA’s commitment to opening the second PPP application window exclusively to minority- and women-owned businesses for the first two days. Click here to read the document in full.
The article offers a helpful overview of a number of PPP details that have changed with this second round of loan funding, including the following:
- Second-draw PPP loans of up to $2 million are available for eligible businesses that received first-round funding. Eligibility requirements include having 300 or fewer employees; having used the entirety of the first-round funding on eligible expenses prior to receiving second-draw funding; having experienced a reduction in revenue of 25% or more, comparing an eligible time period in 2020 with one in 2019.
- Businesses that did not receive PPP funding in the first round may be eligible for second-round PPP funding if they meet the following criteria: having 500 or fewer employees and being eligible for other SBA 7(1) loans; being a sole proprietor, independent contractor, or eligible self-employed individual; being a non-profit; being an operation in the accommodation and food services sector with fewer than 500 employees at a single physical location; being a Section 501©(6) business league with 300 or fewer employees; certain qualifying news organizations.
- The maximum allowable amount for both first- and second-draw PPP loans is 2.5 times the organization’s average monthly payroll, though some eligible businesses can receive up to 3.5 times their average monthly payroll. For first-draw PPP loans, the maximum tops out at $10 million.
- 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 PPE and facility modification, property damage related to public disturbances not covered by insurance, expenditures for purchases essential to current operations, and certain covered operating expenditures.
- The latest COVID-19 relief bill included specific provisions for PPP applicants that are 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 insure that businesses in these categories are served through the PPP program.
The timeline for the second PPP application window is as follows:
- January 11, 2021 – 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.
- To be announced – 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 apply for PPP funds in this second round of funding, first-time borrowers should use Form 2483 – Paycheck Protection Program Borrower Application Form and borrower seeking second-draw loans should use Form 2483-SD – PPP Second Draw Borrower Application Form. For more details on these forms and the procedures that accompany them, click here for a helpful article from the Journal of Accountancy.