WHAT YOU NEED TO KNOW ABOUT THE LATEST ROUND OF PPP LOANS
Following months of negotiation, on December 21, 2020, Congress passed the Consolidated Appropriations Act of 2021. The mammoth bill, which stretches to over 5,500 pages, expands on the relief provided by the CARES Act and includes many provisions aimed to provide additional relief for those impacted by COVID-19 and to stimulate the economy. This update focuses on an important component of the new Act, the extension of the Paycheck Protection Program (“PPP”) administered by the U.S. Small Business Administration. The changes to the PPP program authorizes a new round of loans, and contains changes impacting both new and existing borrowers.
As you recall, the initial round of PPP loans authorized by the CARES Act quickly ran out of funding, while a second round of loans was available until August 8, 2020. The new Act expands the program again, providing approximately $284 billion for a third round of PPP loans which may be applied for until March 31, 2021. Borrowers who have already received a PPP loan can apply for a second loan of up to $300 million as long as they have 300 employees or less and can show gross receipts in any calendar quarter of 2020 that are at least 25% less than the same quarter in 2019. However, borrowers whose primary business is accommodations and food service that have no more than 300 employees in any physical location are also eligible for these “second draw” loans. In addition, existing borrowers who returned a portion of the funds but have not yet applied for forgiveness may reapply to receive the maximum allocation.
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clarification regarding loan certifications from the sba
On May 13, 2020, the Small Business Administration (SBA) issued new guidance to address the confusion created by its previous guidance which suggested that the recipients of Paycheck Protection Program (PPP) loans would need to revisit their applications to determine whether they would still be able to certify in good faith that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” Borrowers who deemed themselves unable to make the certification in good faith had until May 14th to return the funds without consequence. That date has now been extended to Monday, May 18th.
The new guidance should provide comfort to the recipients of PPP loans of all sizes. According to the new guidance, any recipient of a loan less than $2 million will be deemed to have made the required certification regarding the necessity of the loan in good faith. Recipients of loans over $2 million are still likely to face increased scrutiny, but if the SBA determines that the borrower lacked an adequate basis for the required certification, it will notify the borrower. As long as the borrower repays the loan after receiving notice, the SBA will not pursue any further enforcement activities.
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Additional Resources
A list of participating lenders and additional information can be found on www.sba.gov.
Click here to access the application for PPP
Click here to reference important details for borrowers about PPP.