As we have previously discussed in other blog posts, the Paycheck Protection Program (“PPP”) administered by the Federal government provides critical assistance and incentives for small businesses to keep their workforce employed as the COVID-19 pandemic continues to rage across the county.
The PPP portal recently re-opened for both “First Draw” and “Second Draw” loans. The new round of PPP loans introduces new provisions to provide greater flexibility, such as allowing borrowers to set their loan period to be between 8-24 weeks and authorizing additional expenses such as operations expenditures, property damage costs, supplier costs and worker protection expenditures to qualify as eligible expenses.
First Draw Loan applications began on January 11, 2021 for new borrowers and certain existing borrowers that did not receive loan forgiveness by December 27, 2020. If existing borrowers previously returned some or all of their First Draw funds or they request to modify their First Draw Loan amount if they previously did not accept the full eligible amount (“First Draw Loan”).
Second Draw Loan applications commenced on January 13. 2021. Certain eligible borrowers that previously received PPP Loans and used the proceeds for authorized uses can now apply for a Second Draw Loan (“Second Draw Loan”). Eligible participants may not employ more than 300 employees, and must demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020. Second Draw Loan proceeds may be used for the same costs as First Draw Loans.
Both First and Second Draw Loans may qualify for full forgiveness if following the loan disbursement employee compensation levels are maintained, loan proceeds are spent on eligible expenses, and at least 60% of the proceeds are spent on payroll costs. Both Loans will have the same terms regardless of borrower/lender, and borrowers are eligible to apply until March 31, 2021 through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, eligible non-bank lender or other institution that is participating in the PPP.
Initially, the portal will only be open to community financial institutions (i.e., generally private financial institutions focused on serving low-income, low-wealth, and other disadvantaged people and communities). The Small Business Association ("SBA") states that “shortly thereafter” the PPP will open to all participating lenders, however no date has been provided.
If you have any questions regarding how the PPP loan applications affect your business, please contact our Corporate or Labor & Employment departments.
The content of this post is for informational purposes only and should not be construed as legal advice or legal opinion. You should consult a lawyer concerning your specific situation and any specific legal question you may have.