SBA Issues Guidance on the Reopening of the PPP

January 15, 2021|

The Consolidated Appropriations Act, 2021 extended the Paycheck Protection Program (PPP) through March 31, 2021, allocating an additional $284 billion to businesses affected by the COVID-19 pandemic. Qualified first-time PPP borrowers, as well as certain business owners who were granted a PPP loan last year, are eligible.

The PPP opened this week with the Small Business Administration (SBA) accepting loans from community financial institutions (CFDI) starting Friday, January 15. This gives those institutions a two-day head start on submitting loan requests through the PPP loan portal and is designed to increase loan access to underserved communities. Business owners can find SBA-approved CFDI and small lenders through the SBA’s Lender Match online tool. The SBA will begin accepting loans from all lenders on Tuesday, January 19.

How has PPP changed?

  • There are now two PPP loans with corresponding applications. One is for first time PPP loan borrowers taking what is called First Draw PPP Loans. The second type, known as a Second Draw PPP Loan, is for borrowers who received a PPP loan last year.
  • PPP borrowers can set their coverage between eight and 24 weeks.
  • PPP loans can be used to cover additional expenses, such as supplier costs and worker protection expenses.
  • There will be a shorter PPP loan forgiveness application for businesses that received less than $150,000.
  • Forgiven PPP loan amounts are not included in gross income for tax purposes, and deductible expenses paid for with a forgiven PPP loan remain deductible, overruling previous IRS guidance.
  • Some existing PPP borrowers can request to modify their first-draw PPP loan amount.

Second-draw PPP Loans

Borrowers are eligible for a second draw of PPP funds (up to $2 million), provided they have:

  • Three-hundred or fewer employees;
  • Can demonstrate a 25% decline in revenue in one-quarter of 2020 relative to that same quarter in 2019.
  • Have used or will have used the full amount of the original PPP loan on or before the expected date for the second PPP loan to be dispersed.

Other Key PPP Guidelines

Changes to the program made via the Paycheck Protection Program Flexibility Act of 2020 are maintained in the new PPP program.

  • Loans granted after June 5, 2020, become due in five-years.
  • Sixty percent of the loan must be used for payroll expenses.

In conjunction with the Treasury Department, the U.S. Small Business Administration (SBA) released interim guidance to provide clarity on the current round of PPP. For questions regarding the PPP and your business, consult with your CPA.

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