The Consolidated Appropriations Act of 2021 was signed into law on December 27, 2020. The legislation includes another $284 billion in funding for forgivable loans through the Paycheck Protection Program (PPP) for both first-time and second draw borrowers. The following are highlights from interim guidance published by the SBA:
Unlike PPP loans made prior to August 8, 2020, new first-time applicants, including farmers and ranchers, will have the ability to use either 2019 or 2020 when calculating their maximum loan amount. The maximum loan amount remains the lesser of 2.5x average monthly payroll or $10 million.
Covered eligible expenses are expanded and now include:
Eligible applicants that did not receive a PPP loan prior to August 8, 2020 will have the ability to apply for a PPP First Draw Loan on or before March 31, 2020. Businesses will need to prove they were in operation on February 15, 2020, are not permanently closed, and are not excluded based on other ineligibility criteria.
In addition to previous eligibility criteria, the Econmic Aid Act included expanded eligiblity for:
501(c)(6) organizations are eligible to receive a PPP Loan provided they do not derive more than 15% of their revenue from lobbying, lobbying activities make up loess than 15% of the business' total activity, lobbyng activites did not exceed a cost of $1,000,000 during 2019, and the organization has fewer than 300 employees.
For purposes of expanded eligiblity, housing cooperatives are defined in section 216(b) of the Internal Revenue Code.
Destination Marketing Organizations are eligible to receive a PPP Loan provided they do not derive more than 15% of their revenue from lobbying, lobbying activities make up loess than 15% of the business' total activity, lobbyng activites did not exceed a cost of $1,000,000 during 2019, and the organization has fewer than 300 employees.
Most entities may borrow 2.5 times their monthly payroll cost or $2 million, whichever is less. A borrower in the Accomodation and Food Services sector, with NAICS code beginning with 72 (e.g. resturant), may borrow 3.5 times its monthly payroll costs.
Second Draw PPP Loans are generally subject to the same terms, conditions, and requirements as First Draw PPP Loans. These include:
A borrower is eligible for a Second Draw PPP Loan only if the borrower satisfies all of the following:
The same affiliation rules that apply to First Draw PPP Loans apply to Second Draw PPP Loans. In most cases, a borrower is considered together with its affiliates to determine eligiblity for the PPP. The CARES Act waived the affiliation rules for certain categories of borrowers, and the Small Business Act, as amended by the Economic Aid Act, applies the same waivers to Second Draw PPP loans, adds a waiver for certain eligible news organizations, and makes adjustments to reflect the reduced size requirement for Second Draw PPP Loans.
In an addition to the list of entities that are ineligible to receive a First Draw PPP Loan, the Economic Aid Act also prohibits the following from receiving a Second Draw PPP Loan:
To be eligible for a Second Draw PPP Loan, the borrower must have experienced a revenue reduction of 25% or greater in 2020 realtive to 2019. That revenue reduction is to be calculated as follows:
Calculation of gross receipts:
Generally, the maximum amount of a Second Draw PPP Loan is the lesser of 2.5 months of the borrower's average monthly payroll costs or $2 million. As part of the loan process, the borrower must certify that they have provided documentation verifying the number of full-time equivalent employees on payroll at the time of application.
Unlike First Draw PPP Loans, the relevant time period for calculating a borrower’s payroll costs for a Second Draw PPP Loan is either (a) the 12-month period prior to when the loan is made, or (b) calendar year 2019.
The SBA provides separate formulas for calculating the maximum amount of a Second Draw PPP Loan provided to the following:
Businesses that are part of a single corporate group may not receive more than $4 million of Second Draw PPP Loans in the aggregate.
A borrower in the Accommodation and Food Services sector, with NAICS code beginning with 72, may borrow 3.5 times its monthly payroll costs.