Journal of Accountancy ~ The Paycheck Protection Program (PPP) will reopen Monday for select lenders and borrowers, the U.S. Small Business Administration and Treasury announced Friday.
The SBA and Treasury said in a news release that initially only community financial institutions that serve minority- and women-owned businesses will be able to make loans. Specifically, these community financial institutions can begin making loans to first-time PPP borrowers on Monday and second-time PPP borrowers on Wednesday.
The application window for forgivable PPP loans will open to all lenders “shortly thereafter,” according to the news release, which did not specify a date. The closing date for the new PPP is March 31.
Congress revived the PPP as part of the $900 billion COVID-19 relief bill that was signed into law on Dec. 27. The original PPP provided $525 billion in forgivable loans over five months before it stopped accepting applications in August. The new PPP has $284.5 billion available, including $35 billion for first-time loans and $15 billion set aside for community financial institutions.
The SBA and Treasury issued guidance late Wednesday night for the rebooted PPP, which shares many of the same rules as the old PPP but also has some significant differences. The guidance came in the form of three documents, as follows:
An 82-page interim final rule (IFR) called “Business Loan Program Temporary Changes; Paycheck Protection Program as Amended by Economic Aid Act,” which consolidates eight months of rules released for PPP forgivable loans for first-time borrowers and incorporates changes made by the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, P.L. 116-260.
A 42-page IFR called “Business Loan Program Temporary Changes; Paycheck Protection Program Second Draw Loans,” which establishes guidelines for new PPP loans to businesses that previously received a PPP loan.
A three-page document called “Guidance on Accessing Capital for Minority, Underserved, Veteran and Women-Owned Business Concerns,” which includes a commitment from the SBA to make at least the first two days of the PPP application window open exclusively to applications from community financial institutions.
The news release from SBA and Treasury provided a brief list of key PPP updates, shown below. A more detailed summary is available in this JofA article.
Key PPP updates
- PPP borrowers can set their PPP loan’s covered period to be any length between eight and 24 weeks to best meet their business needs. To be eligible for full loan forgiveness, borrowers will have to spend no less than 60% of their PPP loan funds on payroll over the covered period. Previously, PPP borrowers had to choose an eight-week covered period or a 24-week covered period.
- PPP loans cover additional expenses eligible for loan forgiveness, including operations expenditures, property damage costs, supplier costs, and worker protection expenditures;
- The program’s eligibility is expanded to include 501(c)(6) organizations, housing cooperatives, and direct marketing organizations, among other types of organizations.
- The PPP provides greater flexibility for and a clearer definition of seasonal employees.
- Certain existing PPP borrowers can request to modify their first-draw PPP loan amount.
- Certain existing PPP borrowers are now eligible to apply for a second-draw PPP loan.
In general, borrowers are eligible for a second-draw PPP loan of up to $2 million, provided they have:
- Used or will use the full amount of their first PPP loan on or before the expected date for the second PPP loan to be disbursed to the borrower. The IFR also clarifies that the borrower must have spent the full amount of the first PPP loan on eligible expenses.
- Experienced a revenue reduction of 25% or more in all or part of 2020 compared with all or part of 2019. This is calculated by comparing gross receipts in any 2020 quarter with an applicable quarter in 2019, or, in a provision added in the IFR, a borrower that was in operation for all four quarters of 2019 can submit copies of its annual tax forms that show a reduction in annual receipts of 25% or greater in 2020 compared with 2019.