The second round of the Paycheck Protection Program (PPP) is underway, with an additional $284 million in funding to support small businesses struggling during the pandemic. Companies that took advantage of the first PPP program may also be eligible for a “second draw” of up to $2 million if they meet tightened restrictions in size and can demonstrate a negative impact on revenues of at least 25% during at least one quarter of 2020. But other previous PPP borrowers may also be able to access additional funding.
The Small Business Administration (SBA) is allowing certain previous PPP borrowers to reapply for an increase to their existing PPP loan. Previously, a PPP loan could only be increased in specific instances (such as a loan made to a seasonal business or a partnership that did not use loan proceeds to pay partners), and the request had to be made before submitting a loan forgiveness application.
Please note that this provision does not apply to companies who are applying for a separate second draw PPP loan (which are not eligible for increases or reapplications), or to first round PPP borrowers for which forgiveness payments have already been remitted by the SBA.
To reapply or apply for a PPP loan increase, certain requirements must be met:
- Increases to first-draw PPP loans can be made only by the lender of record for the loan, i.e., the lender that is reflected in the SBA’s system as the current owner of the loan. If the loan was sold after it was originated, the lender that purchased the loan is the lender of record.
- Borrowers that returned or repaid a first-draw PPP loan in full are eligible to reapply for that loan provided the lender reported to the SBA before Dec. 27 that the borrower had fully repaid the loan or canceled the loan. The borrower may then apply for a new first-draw PPP loan in an amount the borrower is eligible for under current PPP rules.
- Borrowers that returned or repaid part of a first-draw PPP loan, and for which the SBA has not remitted a forgiveness payment to the lender, may request a loan increase equal to the difference between the amount not paid back by the borrower and the amount previously approved. The lender may disburse those funds to the borrower provided that the lender reported to the SBA before Dec. 27 that the loan had been partially repaid. For example, if a borrower returned $25,000 of a $100,000 PPP loan because the borrower could not spend the funds during the covered period, the lender can disburse $25,000 back to the borrower provided other conditions are met.
- Borrowers that did not accept before Dec. 27 the full amount of a first-draw PPP loan for which they were approved may apply for an increase in the loan up to the amount previously approved. Lenders may approve the request and disburse the funds but must follow one of two processes detailed in the notice based on how they reported before Dec. 27 that the borrower did not accept the full amount of the PPP loan.
- All additional disbursements are subject to availability of funds and must be executed by March 31, 2021.
This is a general overview of the second PPP program. Certain business types have different eligibility rules. For example, while the general limit on number of full-time employees a company may have to be able to apply for a PPP loan is 300, that number is 500 for restaurants and accommodation businesses (like hotels). In addition, seasonal employers and partnerships are treated differently. Please discuss your particular situation with a qualified advisor.
To help determine whether or not you are eligible to reapply for an increase in your first PPP loan, or meet the criteria for a new or “second draw” loan from the new PPP program, please call us at (781) 407-0300.
PLUS – don’t miss out on our “PPP Round Two: More Relief is on the Way” webinar coming up on January 26th! Click here for more details and to register today.