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Payroll Protection Program (PPP) - Version 2

New guidance and applications have been released by the SBA. The following is know as of this message.

First-Draw PPP Loan Still Available

If you did not receive a PPP loan in 2020, it is not too late. The Economic Aid Act has renewed the ability to apply for a First Draw PPP loan and has extended the eligibility to 501(c)(6) organizations (i.e. chambers of commerce), housing cooperatives, destination marketing organizations (i.e. tourist bureau), and selected media organizations. In addition, increases to your First Draw PPP loan can be requested for the following reasons:

Partnership did not include Partner Compensation as permitted
Seasonal Employers eligible for higher amount under Economic Aid Act
Previously returned portion or all of First Draw loan

Second-Draw PPP Loan Request

A borrower is eligible for a Second-Draw PPP loan request if they meet all of the following criteria:

Employees 300 or fewer employees.
Experienced a gross revenue reduction of 25% or more in ANY quarter in 2020 compared to the equivalent quarter in 2019.
Received a first-draw PPP loan and used, or will use the full amount of the first draw loan for allowable expenses before the disbursement of the second draw loan.

Loan Amount

Most borrowers are limited to the lesser of $2 million or 2½ times their average monthly payroll. An eligible NAICS 72 restaurant or hotel is permitted up to 3½ times their average monthly payroll costs.

Payroll costs are permitted to be calculated utilizing calendar year 2019 or 2020.
Same definitions for payroll costs apply, with the clarification that premiums paid on behalf of employees for group life, dental, or vision insurance are included.
Additional guidance is provided for seasonal employers and new entities that were not operational for the full year 2019 but were in business prior to February 15, 2020.

Covered Period

Borrowers now have the flexibility to determine their own covered period. Once the second draw loan request is funded, the borrower can choose any time between 8 weeks and 24 weeks to utilize the funding. This added flexibility lets you manage your business while adhering to the employee retention guidelines.

Additional Allowable Expenses

The Act has expanded the permissible usage of PPP funds for BOTH First and Second Draw loans (retroactive) to include:

Operations expenditures, defined as any business software or cloud computing service that facilitates business operations.
Uninsured property damage caused by the vandalism/looting that occurred in 2020.
Supplier Costs that are essential to operations and made pursuant to a contract or purchase order in effect before the covered period, or during the covered period in the case of perishable goods.
Worker protection expenditures, including PPE (personal protection equipment) and any operating or capital expenditure needed to comply with CDC, Department of Health requirements. This can include, but not limited to, renovations costs for drive-thru window facilities, physical barriers such as sneeze guards, health screening capabilities, etc.

Timing

SBA has announced that only Community Development Institutions, Designated Minority Institutions, Certified Development Corporations, and Microloan intermediaries will begin accepting First-Draw PPP Loan requests Monday, January 11th and Second-Draw requests on Wednesday, January 13th. SBA has stated that PPP will open to all participating lenders shortly thereafter.

Loan Forgiveness

Principal and interest for First Draw & Second Draw PPP Loans remain eligible for full forgiveness if during the 8 to 24-week covered period following loan disbursement the following criteria are met:

Employee and compensation levels are maintained
The loan proceeds are spent on payroll costs and other eligible expenses
At least 60 percent of the proceeds are spent on payroll costs

A simplified one-page forgiveness application for loans of $150,000 or less will be released in the coming days. Borrowers will need to retain documentation to show compliance with program requirements but will not be required to provide those records to their lender. Borrowers seeking forgiveness should discuss their PPP forgiveness application with their financial advisors in light of the expanded eligibility for Employee Retention Tax Credits.

Extras

The Act also includes:

Elimination of the EIDL advance deduction from PPP forgiveness
Clarifies that qualified expenses that result in PPP loan forgiveness are still deductible tax expenses
Expands the usage of Employee Retention Credits
Links for the newly released applications are included below.
- Top-Line Overview of First Draw PPP Loans
- Top-Line Overview of Second Draw PPP Loans
Interim final Rule (IFR):
- PPP Policy Guidance Amendment
- PPP Second Draw Loans

BOARD OF DIRECTORS & STAFF