Paycheck Protection Program Reopens with New Eligibility Rules

Did you apply for a Payroll Protection Program loan last year and still need assistance? Were you afraid to apply last time because of the ever-changing rules? Your business conditions changed and you could use some support? The recently passed Consolidated Appropriations Act of 2021 has restarted the PPP program — there are new parameters and additional business sectors can apply.

Last Friday, the U.S. Small Business Administration (SBA), in consultation with the Treasury Department, announced that the PPP will re-open the week of January 11 for new borrowers and certain existing PPP borrowers.

To promote access to capital, initially, 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. The PPP will open to all participating lenders shortly thereafter.

Also released are the applications for First Draw PPP Loans (SBA Form 2483) and Second Draw PPP Loans(SBA Form 2483-SD).

First Draw PPP Loans

Businesses eligible for First Draw Loans:

  • Generally, businesses with 500 or fewer employees that are eligible for other SBA 7(a) loans
  • Sole proprietors, independent contractors, and eligible self-employed individuals.
  • Any business that averages less than 500 employees per physical location that has a NAICS code starting with 72 (accommodation and food services)
  • Nonprofits, including churches
  • Adds 501(c )(6) and destination marketing organizations
  • Adds certain news organizations (with limitations)
  • Adds housing cooperatives

Borrowers who have already received PPP funds in 2020 and have not applied for forgiveness may reapply for a First Draw PPP Loan if they returned some or all of their First Draw PPP Loan funds. Borrowers who were impacted by changing guidance are also eligible to increase the First Draw amounts.

For most First Draw Loan borrowers, the maximum loan amount is 2.5 times the average monthly payroll for the 12 months prior to application, 2020 or 2019 with a cap of $10 million.

Second Draw PPP Loans

For eligible businesses going for a Second Draw PPP Loan, you must meet all the following additional conditions:

  • Employ no more than 300 employees per physical location
  • Have used or will use the full amount of their first PPP loan
  • Demonstrate at least a 25% reduction in gross receipts in the first, second, third or fourth quarter of 2020 relative to the same 2019 quarter

There are exceptions for accommodations and food services sector (NAICS Code beginning with 72) and seasonal employers.

The maximum loan amount for the Second Draw PPP loan is calculated as the lesser of $2 million or 2.5 times the average monthly payroll for the 12 months prior to application, 2020 or 2019. For borrowers in the accommodation and food services sector, you can apply for  3.5 times your average monthly payroll.

The second draw of the PPP has a lot of similarities to the first round, but also a number of differences. Changes were designed to help those businesses most hurt by and who have not yet recovered from the COVID-19 pandemic. If you intend to apply and need help navigating the program paperwork, do not hesitate to contact your Windham Brannon advisor.

At Windham Brannon, we are dedicated to keeping you up to date with the latest Covid-19 activity in our Covid-19 Resource Center. Our team is working around the clock to ensure we stay up to date on the latest guidance and information to assist you and your business during this unique time.

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