Congress Authorizes Second Round of PPP Loans (“PPP2”) – How to Apply if You Already Have a PPP Loan - The National Law Review

Congress Authorizes Second Round of PPP Loans (“PPP2”) – How to Apply if You Already Have a PPP Loan - The National Law Review

Congress Authorizes Second Round of PPP Loans (“PPP2”) – How to Apply if You Already Have a PPP Loan - The National Law Review

Posted: 12 Jan 2021 12:44 PM PST


On December 27th, the President signed the "Consolidated Appropriations Act, 2021" (H.R. 133) (the "Act").  In the Act, Congress authorized $284B to be used for the second round of the Paycheck Protection Program ("PPP") loans (called "PPP2").   Act. Sec. 301.

Requirements if You Already Have a PPP1 Loan

To get a PPP2 loan from an approved SBA Lender, if you already have an existing PPP loan ("PPP1"), you:

  • Must have fewer than 300 employees, including "affiliates" (for hotels and restaurants this limitation is calculated on a per-physical-location basis).

  • Must be in operation on February 15, 2020.

  • Cannot be publicly traded, be primarily engaged in political advocacy or lobbying, or have significant ownership by residents of China (PRC).

  • Must have used (or have a plan to use) all of their original PPP1 loan for approved expenses.

  • Must be able to show a 25% reduction or more in gross revenue in any quarter in 2020 compared to the same quarter in 2019. New businesses, that were not in business for the entire 2019 year, but were in business before February 15, 2020, can use quarterly revenue for a portion of the year.

How Much Can You Borrow under PPP2?

A multiple of average monthly payroll, as adjusted to the excess compensation for highly compensated employees.

  • For most businesses this is annual payroll divided by 12 times 2.5.

  • Borrowers, with NAICS line of business code of 72 (motels and restaurants), can use annual payroll divided by 12 times 3.5.

  • To determine annual payroll, you can use 2019 total annual payroll, or payroll for the 1-year period ending before the date the PPP2 loan is made.

 Other Rules

  • The maximum loan per each entity under "PPP2" is $2 million (it was $10 million under "PPP1"). Each entity can have only one PPP2 loan, so you cannot seek a second PP2 loan.

  • March 31, 2021 is the application deadline for a PPP2 loan.

Loan Forgiveness under PPP2

Generally, the PPP1 loan forgiveness rules also apply to PPP2 loan forgiveness requests.  Sixty percent of the PPP2 loan must be spent on Payroll costs and the remaining 40% must be spent on approved "Other" costs, all spent during the "covered" forgiveness period.  Borrowers can use either an 8-week or a 24-week "covered" forgiveness period.  The "covered" forgiveness period starts when the Lender puts the PPP2 money into your account.   "Payroll costs" includes compensation of up to $100,000 per employee plus certain group benefits: including life, disability, vision and dental benefits.

The "other" category of expenses includes:  rent, mortgage interest and monthly utilities.   However, the following new items were added to the "other" category for the PPP2 program:

  • Payments for software, cloud computing, HR systems, and accounting needs.

  • Repair costs associated with looting or vandalism during 2020 disturbances when such costs were not covered by any insurance.

  • Expenses paid to essential suppliers for essential goods for periods before the PPP2 loan was received. Payments for perishable items can be made either before or after the PPP2 loan is received.

  • PPE and other "facility modification expenditures" to comply with COVID-19 federal health and safety guidelines, such as: sneeze guards, drive-through windows, and HVAC made improvements from March 1, 2020 onward.

Simplified Paperwork for PPP1 and PPP2 Loan Forgiveness

For PPP loans of less than $150,000, PPP Borrowers just have to sign a new, one-page form, certifying the number of employees retained, the amount spent on payroll costs, and the total loan amount.  SBA should have this new form available by the end of January, 2021.  Paper documentation to support the certifications will not have to be supplied to the Lender, but will have to be retained by the Borrower for four years in the event of an SBA audit.



©2020 Strassburger McKenna Gutnick & GefskyNational Law Review, Volume XI, Number 12

5 Predictions for America's Small Businesses in the Biden Era - Inc.

Posted: 12 Jan 2021 02:42 AM PST

Before this past year, in which the coronavirus took more than 374,000 lives and permanently shuttered around four million small businesses, few people appreciated the crucial role of the U.S. Small Business Administration as well as Karen Mills.  

Today, the former SBA administrator has plenty of company. More than 7.1 million businesses received some form of aid from the agency in 2020. Over 5.2 million small businesses received a Paycheck Protection Program loan during the first and second tranches of the aid program, 1.8 million businesses received debt relief from the agency, and more than 42,300 businesses received a loan through the SBA's flagship 7(a) loan program in 2020.

While Mills--now a senior fellow at Harvard Business School--is duly impressed with the agency she shepherded from 2009 to 2013, she's not surprised. "What most people don't know is that this is actually quite an important and powerful agency in terms of programming dollars and influence. Because although people would say, 'Well, how big is the budget?' it turns out that the real question to ask is: 'What's the portfolio of programs and impact?' "

In 2020, the agency backed more than $547 billion in small-business loans. What's more, 2021 is likely to be significant too. The latest stimulus bill allots $284 billion for PPP loans, which include a second-draw for borrowers who have already received a first PPP loan, as well as additional funding for the SBA's core lending programs.

President-elect Joe Biden wants to make small business a centerpiece of his economic policy plans, says Mills, who has been in touch with Biden's transition team. Here, she offers her assessment of the challenges facing the SBA, which will soon get a new chief in Isabel Guzman, a longtime small-business advocate, and what may come down the pike for America's small businesses under a Biden administration.

1. Women and minorities will receive special attention.

The SBA does far more than provide loan guarantees. It's only one of four pillars of things that they do, notes Mills. It has some 900 small-business development centers, counseling centers, and about 120 women's and veterans' networks.

"All of these are going to be the center of an enormous effort to make sure we get small businesses, particularly underserved women-owned businesses, minority-owned businesses back on their feet," Mill says. They require financial assistance, as well as counseling, she adds. The pandemic "is tough for the shoe repair guy and the café owner."

2. The SBA will play a key role in Biden's agenda.

Biden is giving Guzman and the SBA a big seat at the table--and that should be a net positive for small businesses, says Mills. Under Obama, the SBA chief was elevated to a cabinet level role, and Mills served on Obama's economic team. Still, ensuring smaller companies' voices were heard was difficult, she acknowledges. "I had to jump up and down in the West Wing a lot," she says.

3. Fintechs could get a bigger seat at the table.

For the first time, fintech companies like PayPal, Intuit, and Square were given permission to make SBA-backed loans through the PPP. While these companies still don't have preferred-lender status--that is, they can't necessarily make traditional SBA-backed loans--this could change, says Mills, who notes that the prospect could be a boon for underserved communities like businesses with fewer than 10 employees and those led by people of color.

"The problem with the bank network, which has become even more prominent over the past 10 years, is it doesn't reach the very smallest businesses. That space has been taken over by the Squares and the PayPals and the Intuits," Mills says. Community development financial institutions, which typically operate in lower-income communities, have been great, she adds, "but they're too slow and too few to have moved the needle."

4. The PPP will change banking forever.

Before becoming the SBA chief, Mills worked for 25 years in venture capital. In 2018, she wrote the book Fintech, Small Business & the American Dream: How Technology Is Transforming Lending and Shaping a New Era of Small Business Opportunity (Springer, 2018), which describes the ways technology is changing the banking world. The PPP, she says, is accelerating those changes. It's highlighting the frictions and the barriers in banking, which are making it more difficult for Black-owned businesses and women-owned businesses to get loans, she says. An example of that friction is "information opacity," which she adds "just means it's really hard to look inside a small business and see what it's really doing." The data that lenders are now collecting, she says, could help simplify how they assess the creditworthiness of a given business.

5. The focus will be on recovery and opportunity.

Beyond pandemic relief, Mills says, Biden will be interested in recovery and opportunity--particularly after the vaccine rollout happens en masse. As far as recovery goes, the latest small-business relief law offered to reinstate the credit crisis-era SBA loan guarantees and reduce or eliminate fees.

"We were able to put in an ability to raise the loan guarantees like we did in 2009 that were so effective," says Mills. As for opportunity, she adds, there are many. One is health care, she says, adding: You could see a returned emphasis on the Small Business Health Options Program, or SHOP, an insurance exchange designed to help small businesses compare health plans and enroll in coverage, which were originally offered under the Affordable Care Act. "They never really got fully rolled out because Obamacare got dragged down by processing difficulties," she says. With Biden in the White House and a Democratically controlled Congress, that could change.


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