The SBA began accepting new PPP applications on a limited basis last week through community financial institutions and as of today, the program is now open to all lenders.
As part of the Consolidated Appropriations Act, the SBA received almost $300 million to fund additional first draw PPP loans, as well as second draw PPP loans for lenders who received a PPP loan but require additional relief due to the ongoing pandemic.
Along with updated application forms, the SBA released additional guidance on both first and second draw PPP loans. Below is a quick summary of each:
PPP First Draw Loans
The SBA has reopened the PPP for new borrowers. Funds can be used for payroll costs, mortgage interest, rent, utilities, worker protection costs related to COVID-19 (including benefits), uninsured property damage costs caused by looting and vandalism in 2019, and certain supplier costs and expenses for operations.
- Eligibility
To be eligible, the borrower must have 500 or fewer employees (Nonprofits, veterans organizations, tribal concerns, self-employed individuals, sole proprietorships, and independent contractors are included). - Forgiveness Terms
Eligible borrowers will qualify for full loan forgiveness if during the 8-24 week covered period: employee and compensation levels are maintained; loan proceeds are spent on eligible expenses. For Round 2, there is greater flexibility in how PPP funding can may be used. For a loan to be fully forgiven, at least 60% of the money has to go towards payroll expenses. The remaining 40% or less can be used to cover a broader swath of business expenses than was allowed during the initial round of PPP lending. Beyond mortgage or rent payments and utilities, PPP money may now cover the costs of personal protective equipment and other expenses incurred to meet government-imposed COVID restrictions, as well as property damage, cloud computing, and supplier costs. - Reapplying & Loan Increases
Existing PPP borrowers that did not receive loan forgiveness by December 27, 2020 may also reapply for a first draw PPP loan if they returned some or all of their original loan proceeds, or under certain circumstances, may request to modify their loan amount. - Application Deadline
Eligible borrowers may apply for a first draw PPP loan until March 31, 2021. The updated first draw PPP application form may be found on the US Treasury Website.
PPP Second Draw Loans
The PPP now allows certain eligible borrowers that previously received a PPP loan to apply for a second draw loan. Like the first draw loans, second draw PPP loan funds can be used for payroll costs, mortgage interest, rent, utilities, worker protection costs related to COVID-19 (including benefits), uninsured property damage costs caused by looting and vandalism in 2019, and certain supplier costs and expenses for operations.
- Eligibility
To be eligible, the borrower must have no more than 300 employees; must have used, or will use, the full amount of their original PPP loan on eligible costs listed above; and can demonstrate at least a 25% reduction in gross receipts between comparable quarters of 2019 and 2020. - Forgiveness Terms
Eligible borrowers will qualify for full loan forgiveness if during the 8-24 week covered period: employee and compensation levels are maintained in the same manner as required for the first draw PPP loan; loan proceeds are spent on eligible expenses; and at least 60% of the proceeds are spent on payroll costs. - Maximum Loan Amount
For most borrowers, the maximum loan amount of a second draw PPP loan is 2.5x the average monthly 2019 or 2020 payroll costs up to $2 Million (For borrowers in the food services sector, the maximum loan amount for a second draw PPP loan is 3.5x the average monthly 2019 or 2020 payroll costs up to $2 Million. - Application Deadline
Eligible borrowers may apply for a second draw PPP loan until March 31, 2021. The second draw PPP application can be found on the US Treasury Website.
Do You Qualify?
If you believe you qualify for a first or second draw PPP loan, you should notify your CPA as soon as possible, and begin to gather and review your 2019 and 2020 quarterly revenue information, as well as your 2019 and 2020 payroll information, including gross payroll, group health insurance, retirement benefits paid, employer state and local taxes, group life, vision and dental insurance.
If you have questions about first and second draw PPP loans, or would like assistance with the application process, please contact us at ppp@crrcpa.com, we are happy to help! You can also visit our COVID-19 Resource Center at www.crrcpa.com/covid19 for the latest updates, alerts and impacts.
