SPECIAL REPORT: PPP Loan Guidance

The Small Business Administration (SBA) issued guidance related to the expansion and extension of the Paycheck Protection Program (PPP) loans under the Consolidated Appropriations Act of 2021 (the “Act”). The guidance includes two interim final rules. The first interim rule consolidates the rules for first time borrowers and the second interim rule provides guidance for second draw borrowers.

The SBA reopened the program the week of January 11, 2021 to certain community lenders that serve minority or women owned businesses. The program fully opens to all participating lenders on January 19, 2021. With the reopening of the program, the SBA has released the borrower loan applications. There are two application forms. The first form, Form 2483, is for first time borrowers and the second form, Form 2483 – SD, is for second draw borrowers.

First Time Borrowers

First time borrowers that were operating on February 15, 2020 will be subject to the same program rules and eligibility criteria that were in place for the initial rounds of funding. In addition to expanding eligible expenses, the Act expanded the list of eligible borrowers to include certain broadcast news stations, newspapers, and public broadcasting services, 501(c)(6) not-for-profit organizations, destination marketing organizations, and housing cooperatives.

Second Draw Loans

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.

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.

Simplified Forgiveness

The Act also provides for a simplified forgiveness application for PPP loans under $150,000. The new one-page simplified form, which the SBA has yet to create, will require borrowers to sign a certification describing the number of employees that the borrower was able to retain because of the loan, the estimated total amount of the loan spent on payroll costs, and the total loan amount. Borrowers will not be required to submit documentation with the application form but must retain relevant employment records for four years and other records for three years after submission. Borrowers must provide such documentation if requested by the SBA.

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.

CONTACT:

Andrew J. Annes, Esquire
aannes@satclaw.com
Mobile: (312) 246-3110

John W. Campbell, Jr., Esquire
jcampbell@satclaw.com
Direct: (312) 554-3126

Websites:
https://satclaw.com/
https://www.satcsolutions.com/

https://www.bridgingchicago.com/