SPECIAL REPORT: PPP Loans - Round Two
A new coronavirus relief package, part of the Consolidated Appropriations Act of 2021 (the “Act”), will provide $284 billion for a second round of Paycheck Protection Program (PPP) loans. The second round of PPP loans will be available to not only first-time borrowers but also to borrowers who have already received a PPP loan. To be eligible for a “second draw loan” a business (i) must employ not more than 300 employees; (ii) have gross receipts during the first, second, third, or fourth (if an application is submitted on or after January 1, 2021) quarter that were at least 25 percent less than the gross receipts from the same quarter in 2019; and (iii) must use the full amount of the first PPP loan on or before the date that the second PPP loan is disbursed.
Maximum Loan Amount
The Maximum Loan Amount is the lesser of (i) $2,000,000 or (ii) the product obtained by multiplying (at election of the borrower) (a) the average total monthly payment for payroll costs incurred or paid by the borrower during the 1 year period before the date on which the loan is made multiplied by 2.5 or (b) the average total monthly payment for payroll costs incurred or paid by the borrower during the calendar year 2019 multiplied by 2.5.
Covered Expenses
The types of expenses for which PPP loans can be used has also been expanded. This expansion applies to existing PPP loans, unless forgiveness has already been obtained, and new second draw loans. In addition to the existing list of qualified expenses (payroll, rent, mortgage interest and utilities), PPP loans can now be now be used to pay the following:
Covered 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.
Covered Property Damage Costs: costs related to property damaged and vandalism or looting due to public disturbances that occurred during 2020 that was not covered by insurance or other compensation.
Covered Supplier Costs: expenditures to a supplier of goods that are essential to the operations of the entity at the time at which the expenditure is made and is made pursuant to a contract, order, or purchase order in effect at any time before the covered period, or with respect to perishable goods, in effect before or at any time during the covered period.
Covered Worker Protection Expenditures: operating/capital expenditures to comply with requirements established or guidance issued by the Department of Health and Human Services, the Centers for Disease Control, or the Occupational Safety and Health Administration, or any equivalent requirements established or guidance issued by a State or local government, during the period beginning on March 1, 2020 and ending the date on which the national emergency declared by the President under the National Emergencies Act expires related to the maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID-19.
Addition Guidance
The Act provides that not later than 10 days after the date of enactment of the Act, the Small Business Administration (SBA) shall issue regulations to carry out this Act. The SBA is expected to release guidelines soon, along with the new base forms.
Please be aware that the information contained herein is current as of the date of the release of this Report and is subject to changes and modifications. If you have any questions or need additional information, please contact us.
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Andrew J. Annes, Esquire
aannes@satclaw.com
Mobile: (312) 246-3110
John W. Campbell, Jr., Esquire
jcampbell@satclaw.com
Direct: (312) 554-3126
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