The president promulgated a new stimulus law on December 27, 2020. The new law, the Economic Assistance to Small Businesses, Nonprofit Organizations and Hard-Affected Sites Act, PL 116-260 (“Economic Aid Act”), authorizes new and additional PPP loans and amends the CARES Act to this end. The Economic Aid Law authorizes funds of $ 284.5 billion for PPP loans, including $ 35 billion for first-time borrowers. The United States Small Business Administration (SBA) and the United States Treasury have also issued new guidelines interpreting the new law.
The new SBA / Treasury guidelines, issued as two “Interim Final Rules”, separately address the requirements and issues of borrowers applying for their first PPP loan (“First Drawdown PPP Loan”) and also borrowers who have already received a PPP loan in 2020 and who can now claim a second additional PPP loan (“Second Draw PPP Loan (s)”).
As of January 11, 2021, borrowers applying for a first-draw PPP loan under the new law can apply to community financial institutions exclusively authorized to provide first-draw PPP loans. Borrowers applying for a second-draw PPP loan can apply through the same community financial institutions from January 13, 2021. PPP loans under the new law will be open to all other participating lenders on a date to be determined and who will remain open until March 31. , 2021.
The SBA has also issued separate guidance, titled “Advice on Access to Capital for Minority, Veteran and Women Owned Businesses,” designed to better assist minority, veteran and women owned businesses. women to apply for and receive a PPP loan. .
First-draw PPP loans
The Economic Aid Act and related SBA / Treasury guidelines allow borrowers who did not receive an initial PPP loan to now receive a PPP loan. As before, the maximum PPP loan is $ 10 million. The borrower must have been in operation on February 15, 2020 (paid) and belong to one or more of the following groups:
- Businesses that do not employ more than 500 employees, or that are otherwise eligible under income-based employee size standards or alternatives for the particular business or industry, and including certain non-profit organizations. profit (eg, churches) of Internal Revenue Code Section 501 (c).
- Housing co-operatives, eligible organizations referred to in section 501 (c) (6) (such as trade leagues, chambers of commerce and hospitality offices), or a “destination marketing organization”, no. employing no more than 300 employees and accommodating no more than 15 people. % of revenue from lobbying.
- Independent contractors, eligible self-employed workers or sole proprietors.
- News organizations, with no more than 500 employees per location, majority owned or controlled by a company under NAICS code 511110 or 5151 or public not-for-profit broadcasting entities with a trade or business under NAICS code 511110 or 5151.
- Hotels, motels and restaurants (with NAICS codes starting with 72) with a maximum of 500 employees per physical location.
Some companies and organizations continue to be ineligible for a PPP loan, and now also include publicly traded companies, sports leagues and companies controlled by the president, vice president, head of executive departments and members of the Congress (or their spouses)
Second Draw PPP Loan Requirements
The new law and related SBA / Treasury guidelines also allow borrowers who have already received a first PPP to receive an additional second PPP loan when the borrower has:
- 300 employees or less.
- used the full amount of their first PPP loan to pay for eligible expenses, and before a second PPP loan can be received.
- Experienced a 25% or more reduction in gross receipts for any quarter of 2020 compared to the same quarter in 2019. Under the new SBA / Treasury guidelines, a borrower can also meet this requirement while in business for the entire period. year 2019, and the total annual gross receipts for 2020 have decreased by at least 25% compared to 2019. The new SBA / Treasury Directive defines gross receipts to include all income in any form received or accrued from whatever source it may be, including from the sale of products or services, interest, dividends, rents, royalties, fees or commissions, less returns and indemnities. Canceled 2020 PPP loans are not included in 2020 gross receipts for these purposes.
PPP loan amounts
First-draw PPP loans and second-draw PPP loans will be up to 2.5 times the average monthly salary costs (capped at $ 100,000 per employee per year in 2019, 2020 or the year prior to the loan. PPP borrowers with NAICS codes starting with 72 (hotels, motels and restaurants in general) can now receive a second-draw PPP loan up to 3.5 times the average monthly salary costs.The maximum for a first-draw PPP loan continues to be capped at $ 10 million.
Eligible PPP loan expenses
Eligible expenses to be financed through a PPP First Draw Loan or PPP 2nd Draw Loan are the same as before, including payroll, rent, mortgage interest covered and utilities. In addition, the following costs are now also eligible:
- Certain expenses for worker protection and modification of facilities, including personal protective equipment, to comply with federal COVID-19 health and safety guidelines.
- Certain property damage costs related to property damage and vandalism or looting due to public unrest in 2020 that were not covered by insurance or other compensation.
- Vendor expenses that are essential at the time of purchase for the recipient’s day-to-day operations.
- Certain other operating expenses, such as payments for business software or cloud computing services; the cost of delivering products or services; the processing, payment or monitoring of salary expenses; human ressources; sales and invoicing functions; or accounting or tracking supplies, inventory, records and expenses.
For expenses to be repayable, borrowers will need to devote at least 60% of the loan proceeds to payroll over a covered period of 8 or 24 weeks.