Two new interim final rules for the Paycheck Protection Program (PPP) have been released from the Small Business Administration (SBA) and Treasury in response to the changes and second round of funding enacted by the relief portion of the Consolidated Appropriations Act signed at the end of December.
Changes in provisions for first-draw PPP loans
First-time borrowers of PPP forgivable loans received consolidated rules in the IFR “Business Loan Program Temporary Changes; Paycheck Protection Program as Amended” as well as an outline of changes made by the Act. Here’s what this rule clarified:
- The authority to make PPP loans was extended to March 31, 2021.
- Eligibility was expanded to:
- Businesses that are also eligible for other SBA 7(a) loans with 500 or fewer employees.
- Independent contractors, sole proprietors, certain self-employed individuals.
- Nonprofits, including churches.
- Accommodation and food services – Fewer than 500 employees per location.
- Business leagues, chambers of commerce, visitor’s bureaus and others (not sports leagues) that fall under the Sec. 501(c)(6) designation – Must have fewer than 300 employees, less than 15% of receipts from lobbying, and less than 15% of activity and less than $1 million spent toward lobbying.
- Certain news organizations and nonprofit public broadcasting organizations with no more than 500 employees.
- Publicly traded companies or businesses with direct or indirect control by the president, vice president, head of executive departments, or members of Congress (including spouses) are now ineligible.
- Qualifying payroll documentation may include payroll records; payroll tax filings; Form 1099-MISC; Form 1040, Schedule C or Schedule F; sole proprietorship income and expenses; bank records.
- Hotels and restaurants can receive loans up to 3.5 times their average payroll cost (2.5 times for every other industry).
- Maximum loan amount is $10 million.
- Additional eligible costs include COVID-related worker protection and facility modifications; property damage costs related to public disturbances; suppliers expenditures essential to operations; operating expenditures for software/cloud computing services essential for running the business.
- First-draw loans of $150,000 or less can use a simplified forgiveness application (form is due to be released by Jan. 20).
Additionally, specific funds were set aside for minority, underserved, veteran, and women-owned businesses. When the PPP portal reopens on Monday, Jan. 11, lenders for underserved communities will have exclusive access for two days for first-draw loans and will be able to offer second-draw loans on Wednesday, Jan. 13. The portal will be open to all borrowers following these exclusive access days.
New provisions for second-draw PPP loans
In the IFR “Business Loan Program Temporary Changes; Paycheck Protection Program Second Draw Loans,” much awaited guidance was released for those looking to apply for a second PPP loan. Here’s what it said:
Eligible borrowers must
- Have 300 or fewer employees
- Have used or will use the full amount of their first PPP loan on or before expected date of second loan disbursement, and the full amount must have been used on eligible expenses.
- Have had at least 25% reduction in revenue for all or part of 2020 compared to the same time in 2019. Gross receipts can be used for calculation, or annual tax forms can be used for those in operation for all four quarters of 2020.
- The gross receipts used for calculation were defined to include all revenue regardless of form in which it was received or accrued or the source.
- First draw PPP loans should not be included in 2020 gross receipts.
New PPP application forms have not yet been released for first or second-draw loans. We will continue to update you as guidance, portals, and applications become available. Contact us for assistance with your application for a first or second-draw loan or forgiveness.