First Draw PPP Loans

The new legislation will permit lenders to make new “first draw” PPP loans January 19, 2021 through March 31, 2021 or until the SBA’s funding for such loans runs out.

While the new legislation makes certain changes to the “first draw” PPP loans that were offered earlier in 2020 and clarifies certain rules that were already put in place by the SBA, many of the requirements for “first draw” PPP loans will remain the same.

Second Draw PPP Loans

The new legislation will enable qualified businesses to apply for another round of PPP funding capped at $2 million and is calculated at 2.5x the average monthly payroll costs, except for entities in industries assigned to NAICS code 72 (Accommodations and Food Services) who may receive loans of up to 3.5x average monthly payroll costs.

Eligibility requirements include having no more than 300 employees, having fully used the first draw, and has experienced at least a 25% reduction in gross receipts in any one quarter in 2020 as compared to the same quarter in 2019. More details apply, and we anticipate that the second draw process will involve the SBA issuing new rules, forms, and guidance after the new Bill is enacted.

PPP Forgiveness

There are multiple changes coming for the forgiveness process. We will update this website as guidance and processes are further defined. Here are some of the details as we know them currently:

• Loans of $150,000 or less:
  • For loans $150,000 or less, a one-page SBA certification form will be developed to simplify the forgiveness application process.
  • The new legislation provides that the SBA may not require additional materials unless necessary to substantiate revenue loss requirements or satisfy relevant statutory or regulatory requirements. However, borrowers are required to retain relevant records related to employment for four years and other records for three years.
  • Because this new certification form is expected to simplify the forgiveness process, we strongly encourage clients to wait for this form to be incorporated into our application process. Pending SBA guidance, our current target for implementation is early February.
• Expansion of Covered Items:
  • Except for borrowers who have already had their loans forgiven, this new legislation includes making the following expenses allowable and forgivable uses for Paycheck Protection Program funds:
    • Covered operations expenditures. Payment for certain business software and cloud computing expenses (that facilitate business operations, product or service delivery, the processing, payment, or tracking of payroll expenses, human resources, sales and billing functions, or account or tracking of supplies, inventory, records and expenses).
    • Covered property damage costs. Costs related to property damage due to public disturbances that occurred during 2020 that are not covered by insurance.
    • Covered supplier costs. Expenditures to a supplier pursuant to a contract, purchase order, or order for goods that are essential to the recipient’s operations at the time at which the expenditure was made and that were made: (i) for nonperishable goods, under a contract in effect prior to taking out the loan; or (ii) for perishable goods, under a contract in effect prior to taking out the loan or at any other time during the forgiveness “covered period” for the loan.
    • Covered worker protection expenditure. Personal protective equipment and adaptive investments to help a loan recipient comply with federal health and safety guidelines or any equivalent State and Local guidance related to COVID-19 during the period between March 1, 2020, and the end of the national emergency declaration.
• Loan Forgiveness “Covered Period” Flexibility:
  • Borrowers will be able to select any length of covered period between 8 and 24 weeks, starting on the day the loan is disbursed and ending on a day selected by the borrower as defined by the SBA.

PPP Modifications

Based on the recent legislation, some PPP loans may be eligible for modifications to accommodate for changes in what expenses can be part of the loan, terms, and associated forgiveness (including that certain borrowers whose forgiveness was reduced by the amount of an Economic Injury Disaster Loan (EIDL) Advance may be eligible for that reduction to be reversed).

At this time, we do not have details defined on the loan modification process, and we anticipate that the SBA will issue new regulations, forms, and/or guidance to effect the changes in the recent legislation.