UPDATE: PPP Application Deadline Extended to May 31, 2021 | Miller Canfield
UPDATE, APRIL 5, 2021: On March 30, 2021, President Biden signed the P3 Extension Law of 2021 into law extending the Paycheck Protection Program from March 31, 2021 to June 30, 2021. However, the SBA may not accept first or second draw PPP loan applications from new lenders submitted after May 31. Please note that Monday May 31st is Memorial Day (the last working day before the request is Friday March 28). The SBA will then have until June 30 to process and approve applications submitted before the application deadline.
The SBA, in consultation with the Treasury Department, announced the reopening of its portal for PPP First Drawdown and Second Drawdown requests to all eligible PPP lenders as of January 19, 2021. The portal had already been reopened to institutions community funds for the first claim draw on January 11 and the second claim draw on January 13 and to eligible small lenders (these will have less than $ 1 billion in assets) on January 15.
The deadline for submitting applications is March 31, 2021. Eligible borrowers wishing to apply for a first PPP drawdown loan (or an increase from a first PPP drawdown loan) or a second PPP drawdown loan must do so as soon as possible. as possible given the funding available under the Economic Aid Act and last year’s experience with undergraduate PPP loan applications.
A copy of the first draw PPP loan application is available here [PPP First Draw Borrower Application Form (sba.gov)] and a copy of the second PPP sweepstakes request can be found here [PPP Second Draw Borrower Application Form (sba.gov)].
The Law on Economic Aid for Small Businesses, Non-Profit Organizations and Hard-Affected Sites (Pub. L. 116-260) (Law on Economic Aid) (adopted as part of the Consolidated Appropriation Law 2021), which became law on December 27, 2020, extends the authority of the Small Business Authority (SBA) to guarantee PPP loans until March 31, 2020 and revises certain program requirements. The Economic Aid Law authorizes additional funding of $ 284 billion for the “second round” PPP loan program.
The SBA and the Treasury Department have issued two Interim Final Rules (IFRs) regarding the second cycle PPP loan program. The first IFR, “Temporary Changes to the Business Loan Program; Paycheck Protection Program as Amended by the Economic Aid Act” (“Consolidated IFR PPP first draw“), incorporates the changes made to the PPP requirements by the Economic Assistance Act and consolidates and restates 19 IFRs issued by the SBA and the Treasury Department with respect to the first PPP loan program. The second IFR,” Temporary changes to the business loan program; Paycheck Protection Program Second Draw Loans “(“Second IFR PPP draw“), implements the” second draw “PPP loans authorized under the Economic Aid Act. The consolidated first draw PPP IFR and the second draw PPP IFR entered into force on January 12, 2021 The Consolidated First Draw PPP IFR indicates that the SBA intends to issue an additional Consolidated IFR covering the cancellation of PPP loans and the review process of PPP loans.
SUMMARY OF FIRST DRAWING PPP LOANS
A first-draw PPP loan is only available to first-time eligible borrowers (those who did not receive a PPP loan under the first PPP program). The eligibility requirements for a first-draw PPP loan are the same as in the first round of the PPP program in many ways, but there are several changes:
- The applicant must make the certifications, representations and warranties set out in the application form, including that “[c]The current economic uncertainty makes this loan request necessary to support the ongoing operations of the [a]folding. “
- The applicant must have been in business on February 15, 2020 and have had employees or an independent contractor by that date or be a qualifying self-employed person, independent contractor or owner without employees.
- The applicant must meet (a) the applicable size criteria based on employees (generally no more than the largest of 500 employees or the employee-based size standard for the applicant’s NAISC code (taking into account employees of the applicant and all domestic and foreign subsidiaries)., subject to the exemption from the membership rules for certain companies, including eligible franchises) and the exceptions applicable to certain newly added eligible borrowers, including housing cooperatives ( 300 employees) and newspaper publishing companies, radio and television companies and public not-for-profit broadcasting companies (500 employees) per location), or (b) the applicable size standard based on revenue for the applicant’s NAISC code or an alternative SBA size standard.
- Eligible borrowers are housing cooperatives; newspaper publishing companies, broadcasting and television companies and public not-for-profit broadcasting companies; state or local government owned 501 (c) (3) tax-exempt hospitals (if the hospital receives less than 50% of funding from state or local government sources, excluding Medicaid tax); exempt electricity and telephone cooperatives; tax-exempt destination marketing organizations and tax-exempt 501 (d) (6) organizations that meet other eligibility requirements.
- Public enterprises, hedge funds, private equity firms, firms that went bankrupt at the time of application or prior to the disbursement of the PPP loan, and permanently closed enterprises are not eligible for PPP loans.
- The maximum amount of a first-draw PPP loan is the lesser of (a) 2-1 / 2 times the borrower’s average monthly salary costs (calculated in accordance with the first-draw PPP rules which now allow the borrower to select 2019 or 2020 as base period) or (b) $ 10,000,000. Members of the same corporate group cannot receive first-draw PPP loans greater than a total of $ 20 million for all group members, regardless of any deviation from the membership rules.
- The permitted uses of the proceeds from PPP loans are broadened to include covered operating expenses (software and cloud computing services to facilitate business operations); covered property damage costs (for property damage, vandalism or looting due to public unrest in 2020 not covered by insurance or other compensation); covered supplier costs (for essential goods subject to certain conditions); and covered worker protection expenses (operating and capital expenses to comply with COVID guidelines, including for employee personal protective equipment).
- The borrower is allowed to choose the length of the forgiveness period between 8 weeks and 24 weeks after the loan disbursement date (previously borrowers had to select 8 or 24 weeks). At least 60% of the proceeds of the PPP loan must be used for eligible salary costs for the total loan amount to be potentially forgivable. The discount deduction of any EIDL advance amount received by the borrower has also been removed.
- A borrower can only apply for and receive one first-draw PPP loan, although some borrowers may reapply or request an increase to an existing first-draw PPP loan (including partnerships to include general partners in the calculation of the loan amount, seasonal employers to increase the loan amount using the revised calculation in accordance with the Law on Economic Aid, and whether the borrower has returned or has not accepted all or part of the amount of the previously approved PPP loan).
SUMMARY OF THE SECOND DRAFT PPP LOANS
A “second draw” PPP loan is only available to eligible borrowers who have already received a first draw PPP loan and have used or will use the full amount of the proceeds (including any amount increased as described above. ) no later than the scheduled date of disbursement of the second PPP loan. The main differences in the eligibility conditions for a second-draw PPP loan compared to the conditions for a first-draw PPP loan include:
- The employee-based size requirement has been reduced to 300 employees (under membership rules).
- The candidate must have experienced a reduction in income (gross revenue) of at least 25% in at least one quarter of 2020 compared to the corresponding quarter in 2019.
- The following additional entities are do not eligible for a second PPP raffle:
- Companies engaged in lobbying activities, including research or advocacy on public policy or political strategy (“think tank”).
- Any entity (i) for which an entity organized under the laws of China or Hong Kong or which has significant activities in China or Hong Kong owns or controls 20% or more of the economic interests of the entity (including equity or capital or beneficial interests in an LLC or partnership) or (ii) has a board member who is a resident of China.
- Any person or entity required to register under the Foreign Agents Registration Act.
- The maximum amount of a second-draw PPP loan has been reduced to the lesser of (a) 2-1 / 2 times (or 3-1 / 2 times in the case of hotels and restaurants) the average monthly salary costs of the borrower or b) $ 2,000,000. Members of the same corporate group cannot benefit from second-draw PPP loans greater than a total of $ 4 million for all group members, regardless of any deviation from the membership rules.
- A borrower can only apply for and receive one random draw PPP loan.
The information in this alert is based on the Economic Aid Act, the Consolidated First Draw PPP IFR and the Second Draw IFR and is subject to change as additional guidance is issued by the SBA and the Ministry of the Treasury regarding the cancellation of PPP loans, review of PPP loans and other matters.