new PPP loan guidance

It was recently announced by the U.S. Small Business Administration (SBA) that beginning the week of January 11, the Paycheck Protection Program (PPP) will re-open for new borrowers and certain existing PPP borrowers. According to the SBA, only community financial institutions will be able to make First Draw PPP Loans on Monday, January 11, and Second Draw PPP Loans on Wednesday, January 13. Shortly thereafter, it will be open to all participating lenders. Here is the new PPP loan guidance for small businesses.

PPP Updates

According to the SBA’s press release, these are the key PPP updates:

  • PPP borrowers can set their PPP loan’s covered period to be any length between 8 and 24 weeks to best meet their business needs;
  • PPP loans will cover additional expenses, including operations expenditures, property damage costs, supplier costs, and worker protection expenditures;
  • The Program’s eligibility is expanded to include 501(c)(6)s, housing cooperatives, destination marketing organizations, among other types of organizations;
  • The PPP provides greater flexibility for seasonal employees;
  • Certain existing PPP borrowers can request to modify their First Draw PPP Loan amount; and
  • Certain existing PPP borrowers are now eligible to apply for a Second Draw PPP Loan.

A borrower is generally eligible for a Second Draw PPP Loan if the borrower:

  • Previously received a First Draw PPP Loan and will or has used the full amount only for authorized uses;
  • Has no more than 300 employees; and
  • Can demonstrate at least a 25 percent reduction in gross receipts between comparable quarters in 2019 and 2020.

Maximum Loan Amount

The maximum for a first-draw PPP loan is the same as in the original PPP – $10 million. In general, the loan amount for first- and second-time PPP borrowers is calculated as up to 2.5 times the organization’s average monthly payroll costs in 2019, 2020, or the year prior to the loan.

Forgiveness Eligibility

PPP loans can be forgiven if a business maintains the average size of its workforce and uses the loan for approved purposes. The costs eligible for forgiveness are the same as with the first round of PPP loans – payroll, rent, covered mortgage interest, and utilities. But in the revised PPP guidelines, according to BeeneGarter, the following costs are now also eligible:

  • Operations expenditures – payments for any business software or cloud computing service that facilitates business operations, product or service delivery, the processing, payment, or tracking of payroll expenses, human resources, sales and billing functions, or accounting or tracking of supplies, inventory, records, and expenses
  • Property damage – costs related to property damage, vandalism, or looting due to public disturbances that occurred during 2020 that wasn’t covered by insurance or other compensation
  • Supplier costs – payments made to a supplier for the supply of goods that are essential to the entity’s operations at the time the payment was made. The contract or purchase order must have been in effect before the loan’s covered period.
  • Worker protections – operating or capital expenses made to comply with CDC, OSHA, Department of Health and Human Services’, or local or state requirements to maintain worker or customer safety related to COVID-19. Examples include the installation of drive-thru windows, air filtration systems, physical barriers such as sneeze guards, any health screening costs, and the expansion of additional indoor, outdoor, or combined business space.

Borrowers that spend no less than 60 percent of the funds on payroll over a covered period between eight or 24 weeks are eligible for full loan forgiveness.

Guidance for Minority, Underserved, Veteran and Women-Owned Businesses

The SBA has also published guidelines on accessing capital for minority, underserved, veteran, and women-owned businesses. Congress has set aside funds for new and smaller borrowers, for borrowers in low- and moderate-income communities, and for community and smaller lenders, including:

  • $15 billion across first and second draw PPP loans for lending by community financial institutions;
  • $15 billion across first and second draw PPP loans for lending by Insured Depository Institutions, Credit Unions, and Farm Credit System Institutions with consolidated assets of less than $10 billion;
  • $35 billion for new first draw PPP borrowers; and
  • $15 billion and $25 billion for first draw and second draw PPP loans, respectively, for borrowers with a maximum of 10 employees or for loans less than $250,000 to borrowers in low-or moderate-income neighborhoods. SBA has determined that at least 25 percent of each of those set-asides will go to each one of the groups: loans to borrowers with a maximum of 10 employees and loans less than $250,000 to borrowers in low-or moderate-income neighborhoods.

GTM will continue to monitor developments as businesses look for ways to get back on track. Get more helpful information in our COVID-19 Payroll and HR Resource Center, then request a free quote to learn more about how GTM helps employers focus on growing their business.


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