There has been a flurry of news over the last several days about the $284 billion reboot of the Paycheck Protection Program (PPP), including an issuance of new guidance from the Small Business Administration (SBA) and Treasury as well as the announcement that the program is officially reopening today, January 11, 2021. Here is what you need to know.

New PPP Loan Application Forms Released for First Time and Second Draw Loans

Friday night, the SBA and Treasury released borrower loan application forms for the rebooted Paycheck Protection Program (PPP), which is opening today for very select lenders and borrowers.

Form 2483 - Paycheck Protection Program Borrower Application Form is intended for use by borrowers who are applying for a PPP loan for the first time.

Form 2483-SD - PPP Second Draw Borrower Application Form is intended for use by borrowers who previously took out a PPP loan and are applying for a second time (i.e., a second draw).

These forms contain instructions for how to calculate payroll costs under the newly-released guidelines (more information about these guidelines in the Interim Final Rule section below), as well as adjustments to calculations for seasonal businesses, new businesses, and partnerships.

Along with the application forms, the SBA and Treasury published top-line summaries of first draw and second draw PPP loans as well as two procedural notices:

When can I apply for a PPP loan, whether it's a first-time loan or a second draw?

The program is officially reopening for loan applications today. However, the SBA will initially only accept applications from lenders designated as community financial institutions (CFIs) that serve minority- and women-owned businesses. As a result, only these lenders can apply for first-time loans beginning today and second draw loans beginning on Wednesday.

The SBA and Treasury stated that they will open the PPP to all lenders "shortly" after opening for CFIs, but they have not yet specified a date.

The closing date for the new PPP is March 31, 2021.

Interim Final Rules (IFRs) Issued by SBA and Treasury

Last Wednesday night, the SBA and Treasury issued guidance for the new PPP program in the form of two IFRs, and a three page document called "Guidance on Accessing Capital for Minority, Underserved, Veteran, and Women-Owned Business Concerns."

An 82 page IFR titled "Business Loan Program Temporary Changes; Paycheck Protection Program as Amended by Economic Aid Act" consolidates and updates all of the PPP-related guidance from the first round of the program as well as the reboot authorized in the Consolidated Appropriations Act last month.

Highlights from this IFR include:

  • The PPP loan's covered period can be set to any length between eight and 24 weeks
  • To be eligible for full loan forgiveness, no less than 60 percent of loan proceeds need to be spent on payroll during the covered period.
  • The program's eligibility has been expanded to include 501(c)(6) organizations.
  • There is more flexibility regarding seasonal employees.
  • Certain existing PPP borrowers can request a modification to their first draw loan amount or apply for a second draw loan.

Additionally, a 42 page IFR titled "Business Loan Program Temporary Changes; Paycheck Protection Program Second Draw Loans" establishes the guidelines for businesses that had previously received a PPP loan and plan to apply for a second draw loan.

Highlights from this IFR include:

  • Borrowers are generally eligible for a second draw PPP loan of up to $2 million as long as they have 300 or fewer employees and will have used the full amount of their first PPP loan by the date the second draw loan is disbursed.
  • Second draw borrowers must have experienced a revenue reduction of at least 25 percent in any quarter in 2020 compared with the same quarter in 2019.

This is a very high level summary of the program guidelines issued by the SBA and Treasury. We strongly encourage you to reach out to us with specific questions and to discuss how to navigate PPP loan compliance given your organization's unique circumstances.

You can also view the rebroadcast of a webinar we conducted shortly before the New Year where we discussed the changes ahead for the PPP in more detail.

We anticipate that additional news and guidance about the program will be forthcoming, particularly as it pertains to when lenders will be able to begin accepting applications for the broader categories of borrowers. We will continue to monitor these developments and provide more information as it becomes available.

As always, if you have any questions about these or any other CARES Act accounting matters, please contact your Kreischer Miller relationship professional or any member of our team. For additional news and resources, visit our COVID-19 Business Resources center.

Information contained in this alert should not be construed as the rendering of specific accounting, tax, or other advice. Material may become outdated and anyone using this should research and update to ensure accuracy. In no event will the publisher be liable for any damages, direct, indirect, or consequential, claimed to result from use of the material contained in this alert. Readers are encouraged to consult with their advisors before making any decisions.