The Economic Aid Act, passed on December 27th, 2020, expanded the Paycheck Protection Program created by the CARES Act. The Economic Aid Act authorized $284 billion in new funds for first draw and second draw funds of PPP.
The Small Business Administration (SBA) and U.S. Treasury have issued new guidance on how the changes will take place. The new rules made changes to expand eligibility to new organizations and will make it possible for organizations to make a second draw. You can find more information from the SBA here.
Changes for First-time PPP
- Expanded Eligibility. PPP will now be available to:
- small nonprofits. These include 501(c)(6) (which includes business associations such as chambers of commerce), destination marketing organizations, and housing cooperatives with fewer than 300 employees
- news organizations with fewer than 500 employees
- The Act clarifies that borrowers are eligible for the full amount of EIDL and PPP simultaneously, provided they are not covering the same expenses.
- Borrowers can select their covered period for their loan between 8 and 24 weeks.
- Find the application for First Draw PPP here
Rules for Second Draw PPP
- The Economic Aid Act created a second round of PPP for businesses with fewer than 300 employees and show a loss in 25% of gross revenue between comparable 2019 and 2020 quarters.
- Maximum Loan Size. Loans for a second draw are 2.5 times average monthly payroll costs, up to $2 million. Businesses assigned to NAICS code beginning with 72 (which includes hotels, restaurants, and bars) have a maximum forgivable loan of 3.5 times average monthly payroll costs.
- Find the application for Second Draw PPP here
- $40 billion of PPP has been set aside for businesses in low to moderate income areas and those with 10 or fewer employees.
- $30 billion set aside for mission-driven community lenders; including, community banks, small credit unions, small agricultural credit institutions, community development financial institutions, etc.
- January 11, 2021: First draw loans through Community Financial Institutions.
- January 13, 2021: Second draw loans through Community Financial Institutions.
- Soon thereafter: The application will be open to all participating lenders.
- The application will remain open until March 31, 2021.
The Act clarified that any loan forgiveness under the PPP does not qualify as gross income
Full guidance from the SBA and Treasury:
- PPP Guidance from SBA Administrator Carranza on Access Capital for Minority, Underserved, Veteran, and Women-owned Business;
- Interim Final Rule on Paycheck Protection Program as Amended by the Economic Aid Act; and
- Interim Final Rule on Second Draw PPP Loans.
Disclaimer: This blog is for informational and educational purposes only. It is based on current legislation, rules, and guidance; the SBA may issue additional guidance related to PPP loan forgiveness. If you require legal advice, feel free to reach out to Erika Dunyak (firstname.lastname@example.org) or Jason Wiener (email@example.com), or consult with your accountant or other professional advisor on your particular circumstances.