PPP2 Application Forms Released
After the new COVID-19 relief bill was signed into law on December 27, 2020, $284.5 billion became available to the second installment of the Paycheck Protection Program (PPP2) loans. $35 billion has been set aside specifically for those who are applying for a PPP loan for the first time, and another $15 billion has been reserved especially for community financial institutions (CFIs). First and second-time borrowers will be able to qualify for PPP2 funds.
The US Small Business Administration (SBA) and Treasury have released the following PPP2 loan forms:
- Form 2483—Paycheck Protection Program Borrower Application Form (updated from the original PPP installment) and,
- Form 2483-SD—PPP Second Draw Borrower Application Form (for second-time borrowers only).
Monday, January 11, 2021 marks the opening day for the second round of PPP (PPP2) loan applications only for CFIs that make loans to minority and women-owned businesses. CFIs will be able to make loans to first-time PPP borrowers on Monday, and second-time borrowers on Wednesday.
The Treasury and SBA announced that they would open the PPP2 to all lenders a few days after the CFIs, but no date has been specified.
Overview of Applications and Eligibility
The above PPP2 applications contain instructions on how to calculate payroll costs according to the guidance provided on January 6, 2021 (links to these documents below). Usually, first and second-time borrowers will be able to receive PPP2 loan funds of up to 2.5 times of the business’ average monthly payroll expenses (the cap per employee is $100,000 annualized) in 2019, 2020, or the year prior to the loan. If the borrower has a North American Industry Classification System (NAICS) code beginning with 72 like hotels or restaurants, the business could receive up to 3.5 times its average monthly payroll expenses on their second-draw loan. The application forms also provide calculation adjustments for new businesses, famers and ranchers, seasonal businesses, and partnerships.
The maximum PPP loan available for first-time borrowers is $10 million and for second-time borrowers it is $2 million. First-time borrowers will be eligible for PPP loans if their businesses were in operation on February 15, 2020 and are from one of these groups:
- Independent contractors, sole proprietors, and qualified self-employed individuals;
- Non-profits, which includes churches;
- Businesses that can qualify for other SBA 7(a) loans and have 500 or less employees;
- Hospitality and food service businesses with NAICS codes beginning with 72 with fewer than 500 employees per location;
- News organizations that are majority-owned or controlled, and businesses or non-profit public broadcasting entities that have a NAICS code 511110 or 5151 and no more than 500 employees per location;
- Sec. 501(c)(6) business leagues (visitors’ bureaus, chambers of commerce, etc.) and “destination marketing organizations” that have 300 or less employees and don’t receive more than 15% of their receipts from lobbying. Lobbying activities cannot exceed 15% of the organization’s annual activities and have not cost more than $1 million during their most recent tax year that ended before February 15, 2020. Sports leagues do not qualify.
Second-time borrowers are eligible for up to $2 million if they have:
- 300 or less employees.
- Spent all of the original PPP funds on eligible expenses and used or will use all of the original PPP loan on or before the expected date of PPP2 funds to be disbursed to the borrower.
- Had a 25% or more reduction in revenue in all or part of 2020 compared to all or part of 2019. This can be calculated by comparing gross receipts of a quarter in 2020 with the applicable quarter in 2019, or (by a provision added by the interim final rule) a borrower who was in operation in all four quarters of 2019 can submit a copy of the annual tax forms that display a reduction in annual receipts of 25% or more in 2020 compared to 2019.
Borrowers (first and second loans alike) can have their loans forgiven if the loan are used on the following eligible expenses: payroll, covered mortgage interest, rent, utilities, covered property damaged expenses, covered facility modification and worker protection costs, product service deliveries, covered payments to suppliers and business software or cloud computing that facilitates operations, and several back-office services (including accounting).
Just as with the modified original PPP loans, at least 60% of PPP2 funds must be spent on payroll over a covered period of eight to 24 weeks for the PPP2 loans to be forgiven.
PPP2 Guidance Documents
The Treasury and SBA issued guidance for the PPP2 loans late on Wednesday, January 6, 2021. Many of the rules for PPP2 are the same as the original, but there are a few significant differences. Here are the three guidance documents that were provided:
- An interim final rule (IFR) called “Business Loan Program Temporary Changes; Paycheck Protection Program as Amended by Economic Aid Act” (82 pages). This document consolidates eight months’ worth of rules that were released for the original PPP loans for first-time borrowers. It also incorporates changes that were made by the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, P.L. 116-260.
- Another IFR called “Business Loan Program Temporary Changes; Paycheck Protection Program Second Draw Loans” (42 pages) giving guidelines for PPP2 loans to businesses that are second-time drawing.
- “Guidance on Accessing Capital for Minority, Underserved, Veteran and Women-Owned Business Concerns” (3 pages) details the commitment from the SBA to only allow applications from CFIs for the first two days.
They have also issued top-line summaries and procedural notices to further provide information:
- Top-Line Overview of First Draw PPP Loans
- Top-Line Overview of Second Draw PPP Loans
- Procedural Notice – Modifications to SBA Forms 3506, 3507 and 750 CA (PPP only)
- Procedural Notice – SBA Procedural Notice on Repeal of EIDL Advance Deduction Requirement