New PPP Guidance Issued by SBA
January 11, 2021
New PPP Guidance Issued
The U.S. Small Business Administration (SBA) and Treasury recently issued guidance for the reconstituted Paycheck Protection Program (PPP).
The guidance included two interim final rules (IFRs). (1) The first issuance consolidates the rules for PPP loans for first round borrowers and outlines changes made by the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act. (2) The second lays out the guidance for the second round of loans to businesses that have previously received a PPP loan.
When Can I Apply?
The new PPP portal will re-open the week of Jan. 11. However, this date applies only to first-draw loans for small businesses from lenders from “community financial institutions”. Small business applying for a second PPP loan can begin applying Jan. 13 through these lenders. The PPP will then open to all participating lenders at an unspecified date shortly thereafter and remain open through March 31.
First-draw PPP loans
- Expenses paid with PPP loan proceeds that are otherwise tax-deductible are allowed as deductions.
- Simplified loan forgiveness for loans $150,000 or less
The Economic Aid Act makes first-draw PPP loans available to borrowers that were in operation on Feb. 15, 2020 and come from one of the following groups:
- Businesses with 500 or fewer employees that are eligible for other SBA 7(a) loans.
- Sole proprietors, independent contractors, and eligible self-employed individuals.
- Not-for-profits, including churches.
- New: 501(c)(6) organizations with fewer 300 employees and subject to certain lobbying thresholds.
- New: Housing cooperatives
- New: Accommodations for food service operations with fewer than 500 employees per physical location
Second-draw PPP loans
One of the biggest changes with the new PPP is that Congress made funding available to businesses that had previously received a PPP loan.
- Second-draw loans are available for small businesses that have:
- 300 or fewer employees
- 25% gross receipts decline in any quarter in 2020 compared to same quarter in 2019
- Used or will use full amount of first-draw funds on eligible expenses
- Maximum loan amount = $2 million
- General rule – calculated at 2.5x average monthly payroll costs
- Borrower can choose a covered period that is between 8 and 24 weeks
- Generally the same as documentation required for First Draw PPP Loans
- Costs eligible for forgiveness are the same as in the first round but now also includes:
- Software and cloud computing that facilitate business operation, processing payment, etc.
- Covered property damage expenditures
- Covered supplier costs
- Covered worker protection expenditures
For the full report, please refer to the full (IFR’s) guidance listed in the resource section below.
First and second draw loan applications: