The SBA, in session with the Department of Treasury, has introduced that it’s reopening its portal for first draw and second draw PPP functions to all eligible PPP lenders in the present day, January 19, 2021. The portal had beforehand been reopened to neighborhood monetary establishments for first draw functions on Jan. 11 and second draw functions on Jan. 13 and to small eligible lenders (these will lower than $1 billion in property) on Jan. 15.

The deadline for submitting functions is March 31, 2021. Eligible debtors needing to use for a primary draw PPP mortgage (or improve in a primary draw PPP mortgage) or second draw PPP mortgage ought to achieve this as quickly as practicable in view of the funding out there below the Economic Aid Act and final yr’s expertise with functions for first spherical PPP loans.

A replica of the appliance for a primary draw PPP mortgage could also be discovered right here [PPP First Draw Borrower Application Form (sba.gov)] and a duplicate of the appliance for a second draw PPP mortgage could also be discovered right here [PPP Second Draw Borrower Application Form (sba.gov)].

BACKGROUND

The Economic Aid to Hard-Hit Small Business, Nonprofits, and Venues Act (Pub. L. 116-260) (Economic Aid Act) (enacted as a part of the 2021 Consolidated Appropriations Act), which grew to become legislation December 27, 2020, extends the authority of the Small Business Authority (SBA) to ensure PPP loans by way of March 31, 2020, and revises sure requirement of this system. The Economic Aid Act authorizes $284 billion in extra funding for the “round two” PPP mortgage program.

The SBA and the Department of the Treasury have issued two interim last guidelines (IFRs) with respect to the spherical two PPP mortgage program. The first IFR, “Business Loan Program Temporary Changes; Paycheck Protection Program as Amended by the Economic Aid Act”  (“Consolidated First Draw PPP IFR“), incorporates adjustments to PPP necessities made by the Economic Aid Act and consolidates and restates 19 IFRs issued by the SBA and Department Treasury with respect to the spherical one PPP mortgage program. The second IFR, “Business Loan Program Temporary Changes; Paycheck Protection Program Second Draw Loans” (“Second Draw PPP IFR“), implements the “second draw” PPP loans approved below the Economic Aid Act. The Consolidated First Draw PPP IFR and the Second Draw PPP IFR grew to become efficient as of January 12, 2021. The Consolidated First Draw PPP IFR signifies that the SBA intends to challenge an extra consolidated IFR overlaying PPP mortgage forgiveness and the PPP mortgage evaluate course of.

SUMMARY OF FIRST DRAW PPP LOANS

A primary draw PPP mortgage is offered solely to first-time eligible debtors (these not having acquired a PPP mortgage within the spherical one PPP program). The eligibility necessities for a primary draw PPP mortgage are the identical as within the spherical one PPP program in lots of respects however there are a number of adjustments:

  • The applicant should make the certifications and representations and warranties as set forth within the utility type together with that “[c]urrent economic uncertainty makes this loan request necessary to support ongoing operations of the [a]pplicant.”

  • The applicant will need to have been in operation on Feb. 15, 2020, and will need to have had staff or impartial contractor on that date or be an eligible self-employed particular person, impartial contractor or some proprietor with no staff.

  • The applicant should both meet (a) relevant employee-based dimension exams (typically not more than the larger of 500 staff or the employee-based dimension normal for the applicant’s NAISC code (bearing in mind staff of the applicant and all home and overseas associates, topic to waiver of the affiliation guidelines as to sure companies together with eligible franchises) and exceptions relevant to sure newly added eligible debtors together with housing cooperatives (300 staff) and newspaper publishing firms, radio and tv broadcasting firms and nonprofit public broadcasting firms (500 staff per location), or (b) relevant revenue-based dimension normal for the applicant’s NAISC code or an SBA various dimension normal.

  • Added as eligible debtors are housing cooperatives; newspaper publishing firms, radio and tv broadcasting firms and nonprofit public broadcasting firms; tax-exempt 501(c)(3) hospitals owned by a state or native authorities (if the hospital receives lower than 50% of funding from state or native governmental sources unique of Medicaid tax); exempt electrical and phone cooperatives; tax exempt vacation spot advertising and marketing organizations; and tax exempt 501(d)(6) organizations that meet different eligibility necessities.

  • Ineligible for PPP loans are public firms, hedge funds, non-public fairness corporations, firms in chapter at time of the appliance or earlier than the pp mortgage is disbursed, and completely closed firms.

  • The most quantity of a primary draw PPP mortgage is the lesser of (a) 2-1/2 occasions the typical month-to-month payroll prices of the borrower (calculated in accordance with the primary draw PPP guidelines which now allow the borrower to pick both 2019 or 2020 as the bottom interval) or (b) $10,000,000. Members of a single company group might not obtain first draw PPP loans larger {that a} complete $20 million for all members of the group no matter any waiver of affiliation guidelines.

  • The permitted makes use of of PPP mortgage proceeds are expanded to incorporate lined operations expenditures (software program and cloud computing companies to facilitate enterprise operations); lined property harm prices (for property harm, vandalism or looting resulting from public disturbances throughout 2020 not lined by insurance coverage or different compensation); lined provider prices (for important items topic to sure situations); and lined employee safety expenditures (working and capital expenditures to adjust to COVID steering together with for worker private safety tools).

  • The borrower is permitted to pick the size of the forgiveness interval between 8 weeks and 24 weeks after the mortgage disbursement date (beforehand debtors had been required to pick 8 or 24 weeks). At least 60% of the PPP mortgage proceeds have to be used for eligible payroll prices for the complete quantity of the mortgage to be probably forgivable. The forgiveness deduction of any EIDL advance quantity acquired by the borrower was additionally eliminated.

  • A borrower might solely apply for and obtain one first draw PPP mortgage though sure debtors might reapply or request a rise of an current first draw PPP mortgage (together with partnerships to incorporate basic companions within the calculation of the mortgage quantity, seasonal employers to extend mortgage quantity utilizing the revised calculation in accordance with the Economic Aid Act, and if the borrower returned or didn’t settle for all or a part of the beforehand accredited PPP mortgage quantity).

SUMMARY OF SECOND DRAW PPP LOANS

A “second draw” PPP mortgage is offered solely to eligible debtors that beforehand acquired a primary draw PPP mortgage and have used or will use the complete quantity of the proceeds (together with any elevated quantity as described above) on or earlier than the anticipated date of the disbursement of the second draw PPP mortgage. The principal variations within the eligibility necessities for a second draw PPP mortgage in comparison with the necessities for a primary draw PPP mortgage embrace:

  • The employee-based dimension requirement has been decreased to 300 staff (making use of the affiliation guidelines).

  • The applicant will need to have skilled a discount in revenues (gross receipts) of at the very least 25% in at the very least one quarter of 2020 as in comparison with the corresponding quarter in 2019.

  • The following extra entities are not eligible for a second draw PPP mortgage:

    • Companies engaged in lobbying actions, together with public coverage or political technique analysis or advocacy (“think tank”).

    • Any entity (i) for which an entity organized below the legal guidelines of China or Hong Kong or has important operations in China or Hong Kong owns or controls 20% or extra of the financial curiosity of the entity (together with fairness shares or capital or revenue pursuits in a LLC or partnership) or (ii) has a member of the board of administrators that could be a resident of China.

    • Any particular person or entity required to register below Foreign Agents Registration Act.

  • The most mortgage quantity of a second draw PPP mortgage has been decreased to the lesser of (a) 2-1/2 occasions (or 3-1/2 occasions within the case of accommodations and eating places) the typical month-to-month payroll prices of the borrower or (b) $2,000,000. Members of a single company group might not obtain second draw PPP loans larger {that a} complete $4 million for all members of the group no matter any waiver of affiliation guidelines.

  • A borrower might solely apply and obtain one second draw PPP mortgage.

The info on this alert is predicated on the Economic Aid Act, the Consolidated First Draw PPP IFR, and the Second Draw IFR and is topic to alter as extra steering is issued by the SBA and the Department of Treasury as to PPP mortgage forgiveness, evaluate of PPP loans and different issues.


© 2020 Miller, Canfield, Paddock and Stone PLC
National Law Review, Volume XI, Number 19