On January 6, 2021 the SBA issued two new interim final rules (IFR) relating to “PPP Round 2” of the Paycheck Protection Program and its forgivable loan program.
On December 27, 2020, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Economic Aid Act) (Pub. L. 116-260) became law. The Economic Aid Act extends the authority to make PPP loans through March 31, 2021 and revises certain PPP requirements. This interim final rule incorporates the Economic Aid Act amendments required to be implemented by regulation within 10 days of enactment.
In general, the Economic Aid Act made the eligibility requirements for Second Draw PPP Loans narrower than the eligibility requirements for First Draw PPP Loans. The Economic Aid Act generally provides that a borrower is eligible for a Second Draw PPP Loan only if it has 300 or fewer employees and experienced a revenue reduction in 2020 relative to 2019 (described in the IFR below). In addition, the Economic Aid Act provides that a Second Draw PPP Loan may only be made to an eligible borrower that (i) has received a First Draw PPP Loan, and (ii) has used, or will use, the full amount of the First Draw PPP Loan on or before the expected date on which the Second Draw PPP Loan is disbursed to the borrower.
The SBA will issue additional rules, procedures and forms over the coming days and weeks. Key takeaways from these two rules:
- Access to portals and submitting applications will include reserved time for smaller lenders as in the previous round of PPP
- Applicants that have never received a PPP loan will be able to apply with very similar rules and conditions as in the first round; additional business types are now eligible
- For new PPP loans, additional covered expenses are eligible
- For certain borrowers the original PPP loans may be increased if new rules apply and the loan has not already been forgiven
- EIDL advances are no longer deducted from PPP forgiveness; lenders will receive a reconciliation payment for loans already forgiven
- PPP Second Draw loans are limited to $2 million for eligible businesses with less than 300 employees that experienced a minimum 25% reduction in gross receipts
Coming Soon from the SBA:
- New application forms for PPP Second Draw Loans
- Updated PPP loan borrower application form 2483 for PPP First Draw Loans
- Timeline for opening application systems
- New forgiveness application forms
- Additional IFRs, procedural notices and resources regarding PPP forgiveness process, EIDL grants, and Sheltered Live Venues grants