PPP2 Loan Program to Open January 11 | Friday, January 8, 2021
The second round of the Paycheck Protection Program loans, which some are calling PPP2, will officially reopen on January 11. The Small Business Administration made the announcement today.
Initially, the SBA will only accept what it is calling “first-draw” loans from small businesses that did not receive a PPP loan in the first go-round. Further, it will only accept those applications from lenders designated as “community financial institutions.”
The SBA includes the following lenders in that group:
- Community Development Financial Institutions
- Minority deposit institutions
- Certified development companies
- Microloan intermediaries
The above lenders will be able to process loan applications and submit them to the SBA first.
On January 13, small businesses applying for a second PPP loan will be able to do so, but once again only with community financial institutions.
All other participating lenders will be allowed to make PPP loans “shortly thereafter,” the SBA stated, without specifying an exact date. This second go-round of PPP will run through March 31, according to the SBA.
The National Restaurant Association published a 7-page Guide to the Second Round of PPP This is a summary of all things PPP for the second round (as well as the new changes we secured for the first round), and it should serve as a great guidepost for you as you navigate your options.
New PPP Guidance Issued by SBA, Treasury | January 6, 2021
The U.S. Small Business Administration (SBA) and Treasury issued guidance late Wednesday night for the reconstituted Paycheck Protection Program (PPP). MRA will provide ongoing updates as more information becomes available. As you will recall, the National Restaurant Association, in partnership with MRA and all other state restaurant associations, pressed Congress for this second round of PPP as a down payment on the assistance the restaurant industry will need to recover from the COVID-19 pandemic.
The guidance came in the form of two interim final rules (IFRs).
- The 82-page IFR “Business Loan Program Temporary Changes; Paycheck Protection Program as Amended” consolidates the rules for PPP forgivable loans for first-time borrowers and outlines changes made by the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, P.L. 116-260).
- The 42-page IFR “Business Loan Program Temporary Changes; Paycheck Protection Program Second Draw Loans” lays out the guidelines for new PPP loans to businesses that previously received a PPP loan.
PPP2 Overview | December 27, 2020
Congress revived the PPP as part of the $900 billion COVID-19 relief bill that was signed into law on Dec. 27. The program provided $525 billion in forgivable loansover five months before it stopped accepting applications in August. The Economic Aid Act rebooted PPP (or PPP2, as some call it) with many of the same parameters as the first program but also several important differences from the original PPP.
One of the biggest changes is making PPP funding available to businesses that previously received a PPP loan. Business are eligible for a second PPP loan of up to $2 million, provided they have 300 or fewer employees, have used or will use the full amount of their first PPP loan, and can show a 25% gross revenue decline in any 2020 quarter compared with the same quarter in 2019.
Fresh PPP loans also are available to first-time borrowers from 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.
- Accommodation and food services operations (those with North American Industry Classification System (NAICS) codes starting with 72) with fewer than 300 employees per physical location.
The legislation also allows borrowers that returned all or part of a previous PPP loan to reapply for the maximum amount available to them.
PPP Loan Terms
As with PPP1, the costs eligible for loan forgiveness in PPP2 include payroll, rent, covered mortgage interest, and utilities. PPP2 also makes the following potentially forgivable:
- Covered worker protection and facility modification expenditures, including personal protective equipment, to comply with COVID-19 federal health and safety guidelines.
- Expenditures to suppliers that are essential at the time of purchase to the recipient’s current operations.
- Covered operating costs such as software and cloud computing services and accounting needs.
To be eligible for full loan forgiveness, PPP borrowers will have to spend no less than 60% of the funds on payroll over a covered period of either eight or 24 weeks — the same parameters PPP1 had when it stopped accepting applications in August.
PPP borrowers may receive a loan amount of up to 2.5 times their average monthly payroll costs in the year prior to the loan or the calendar year, the same as with PPP1, but the maximum loan amount has been cut from $10 million in the first round to the previously mentioned $2 million maximum. PPP borrowers with NAICS codes starting with 72 (hotels and restaurants) can get up to 3.5 times their average monthly payroll costs, again subject to a $2 million maximum.
Simplified Application and Other Terms of Note
The new COVID-19 relief bill also:
- Creates a simplified forgiveness application process for loans of $150,000 or less. Specifically, a borrower shall receive forgiveness if the borrower signs and submits to the lender a certification that is not more than one page in length, includes a description of the number of employees the borrower was able to retain because of the loan, the estimated total amount of the loan spent on payroll costs, and the total loan amount. The SBA must create the simplified application form within 24 days of the bill’s enactment and may not require additional materials unless necessary to substantiate revenue loss requirements or satisfy relevant statutory or regulatory requirements. Borrowers are required to retain relevant records related to employment for four years and other records for three years, as the SBA may review and audit these loans to check for fraud.
- Repeals the requirement that PPP borrowers deduct the amount of any Economic Injury Disaster Loan advance from their PPP forgiveness amount.
- Includes set-asides to support first- and second-time PPP borrowers with 10 or fewer employees, first-time PPP borrowers that have recently been made eligible, and for loans made by community lenders.