The Economic Aid Act, P.L. 116-260, which became law in December 2020 as part of the 2021 Consolidated Appropriations Act, rebooted the Paycheck Protection Program (PPP) with $284.5 billion in fresh funding.
On January 13, the U.S. Small Business Administration (SBA) released procedural guidance that details PPP borrowers’ requirements to reapply for a PPP loan or request an increase to an existing PPP loan. Please note if your application was denied the first time because of an error, you can submit a new, corrected application. But if you were denied a loan because you did not meet PPP eligibility requirements, you may want to apply with a different lender.
PPP-eligible lenders with less than $1 billion in assets can begin sending loans to the SBA for approval on January 15. The program will reopen to lenders of all sizes Tuesday, January 19.
The second round of PPP is open to both businesses that received loans in the first round and those that did not. The rules are more strict for those seeking a second loan. For example, second-loan applicants must have 300 or fewer workers, and they must also show that they used all of the money from the first loan in allowable ways.
First Loans for New PPP Borrowers
Businesses that have not previously received a PPP loan may apply for a first-time loan. Note that the rules and eligibility requirements for new PPP borrowers is different than those for second loans. More information about eligibility can be found on our Paycheck Protection Program Site and the SBA’s Coronavirus (COVID-19) Small Business Guidance & Loan Resources.
Second Draw PPP Loans
You may be eligible to apply for a second draw PPP loan if you:
- are a business, certain type of non-profit organization, housing cooperative, veterans’ organization, tribal business, self-employed individual, sole proprietor, independent contractor, or small agricultural co-operative;
- employ not more than 300 employees;
- have used or will use the full amount of your first PPP loan on eligible expenses; and
- demonstrate at least a 25 percent reduction in gross receipts in the first, second, third, or fourth quarter of 2020 relative to the same 2019 quarter (or under the applicable timelines for businesses that were not in operation in Q1, Q2, and Q3, and Q4 of 2019).
Some changes to the overall Paycheck Protection Program include:
- Simpler process to have the loans forgiven for loans $150,000 or less. The Act does not change the requirement that at least 60-percent of loan proceeds must be spent on payroll costs to receive full forgiveness, but the forgiveness process will be more simple and straightforward.
- Money can be used for additional expenses other than just payroll, rent, covered mortgage interest, and utilities. PPP2 also makes the following potentially forgivable:
- Covered worker protection and facility modification expenditures, including personal protective equipment, to comply with COVID-19 federal health and safety guidelines.
- Expenditures to suppliers that are essential at the time of purchase to the recipient’s current operations.
- Covered operating costs such as software and cloud computing services and accounting needs.
- Businesses can use the funds to cover their costs for up to 24 weeks.
- Existing recipients can apply to increase the value of their loans in certain circumstances when they would have been eligible to receive a larger loan after changes in SBA policy.