January 11, 2021
Dear MSHP Member,
The U.S. Small Business Administration (SBA) in consultation with the Treasury Department opened the second round of the Paycheck Protection Program (PPP2) for new borrowers and existing borrowers. Initially, only community financial institutions will be able to make First Draw PPP Loans starting today, Monday, January 11, and second Draw PPP Loans starting on Wednesday, January 13. The PPP2 will open to all participating lenders shortly thereafter.
The SBA published guidance for ensuring increased access to PPP for minority, underserved, veteran, and women-owned business concerns.
How to Apply for the PPP2 Loan
According to the SBA, eligible borrowers can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. You should consult with your local lender as to whether it is participating in the program.
If you wish to begin preparing your application, you can download the following PPP borrower application forms to see the information that will be requested from you when you apply with a lender:
You can also find published summaries of the first-draw and second-draw PPP loans on the SBA website here:
PPP2 Loan Requirements
The second round of PPP is available to first-time qualified borrowers and to borrowers that previously received a PPP loan. Applications are due March 31, 2021.
First draw borrowers can apply to receive up to $10 million if they meet this requirement:
- Businesses with 500 or fewer employees—including nonprofits, veteran organizations, tribal concerns, self-employed individuals, sole proprietorships, and independent contractors
Second draw borrowers can receive up to $2 million if they meet these requirements:
- Businesses with 300 or fewer employees
- Have used or will use the full amount of their first PPP loan
- Can show a 25% gross revenue decline in any 2020 quarter compared with the same quarter in 2019
Use of PPP2 Funds
As with the first loan, the costs eligible for loan forgiveness in PPP2 include payroll, rent, covered mortgage interest, and utilities. Unlike the first round, PPP2 will cover expenses such as cloud computing or remote-work software, personal protective equipment, and insurance benefits (group life, disability, vision, or dental insurance.)
Additionally, the Act replenishes the EIDL Advance fund, which permits small businesses suffering a substantial economic injury to apply for an advance that does not need to be repaid of up to $1,000 per employee limited to $10,000 total. (Prior PPP program stated that any EIDL Advance received would reduce PPP Loan Forgiveness, essentially requiring the Advance to be repaid.)
Choose Your Own Coverage Period
To be eligible for full loan forgiveness, PPP borrowers will have to spend no less than 60% of the funds on payroll over their coverage period. The coverage period begins the day the borrower receives the funds and ends on any day selected by the borrower, but no earlier than 8-weeks from the date the loan is received and no later than 24 weeks from the date the loan is received.
The extension of the Paycheck Protection Program is made available by a provision in the $900 billion coronavirus relief bill allowing for another $284 billion in forgivable, federally-backed loans for small businesses. For more information and additional resources, visit the SBA website.
Sincerely,
