Paycheck Protection Program (PPP)

Only certain businesses are eligible to receive a PPP loan, and these specifications are different for first-time loan recipients and second-draw recipients.

To be eligible for a first-draw PPP loan:

• Your business has less than 500 full-time, part-time, or seasonal employees.
• Your business was operational before February 15, 2020 and remains operational.

To be eligible for a second-draw PPP loan:

• Your business has less than 300 full-time, part-time, or seasonal  employees; if you have multiple locations, you may not have more than 300 employees per location.
• You are able to demonstrate a revenue reduction of at least 25% in the first, second, or third quarter of 2020 (when compared with the same quarter in 2019).
• You have used or will use the full amount of the first-draw PPP.
• Your business was operational before February 15, 2020 and remains operational.

Businesses eligible for first- and second-draw PPP loans include:

• Sole proprietors
• Independent contractors
• Self-employed individuals
• Certain non-profits (the new bill has expanded eligible businesses to include certain 501(c)(6) non-profit organizations)
• Seasonal employers; the new bill has clarified the definition of these to be businesses that operate no more than seven months within a year or earn no more than a third of gross receipts within a six-month period
• Faith-based organizations that have less than 150 employees
• Housing cooperatives that employ less than 300 people

Here’s PPP under the Consolidated Appropriations Act, 2021 at-a-glance:

• $284 billion has been allocated to PPP (including $138 billion of unspent loans from the first round that were reinvested) and the program has been extended to March 31, 2021
• Second-draw loans are available for businesses with under 300 employees
• Businesses eligible for PPP loans has been expanded
• Loan limitations have been expanded for certain businesses
• Forgiveness for loans under $150K have a new, simplified one-page application
  • While expenses eligible for forgiveness still require a 60/40 split of payroll costs/other eligible expenses, group health insurance benefits are now included in payroll costs (and these entail life insurance, disability benefits, vision, and dental insurance)
• Eligible expenses for forgiveness have been expanded (for first-draw loans that have not yet been forgiven and for second-draw loans)
• Borrowers are allowed to choose a covered period that is any period of time between eight and 24 weeks
• PPP funding includes dedicated set-asides for community lenders (CDFIs and MDIs) and business that operate in low-income areas
• A clarification has been made indicating that interest rates on PPP loans are non-compounding and non-adjustable 
• A clarification has been made indicating that forgiven PPP loans are not taxable and forgiven expenses are tax-deductible

First-draw PPP loan limitations:

The maximum amount a business that has not yet received a PPP loan can borrow is the lesser of:

• 2.5 times the average monthly payroll costs and healthcare costs
• $10 million

There may be exceptions to these limits for restaurants and other hospitality businesses.

Second-draw PPP loan limitations:

Any business that is applying for a second draw will be subject to more stringent limitations. The maximum second PPP loan amount is the lesser of:

• 2.5 times the average monthly payroll costs and healthcare costs in the year prior to when the loan was received or within the calendar year
• 3.5 times the average monthly payroll costs and healthcare costs in the year prior to when the loan was received or within the calendar year for any business that is classified under Code 72 by the North American Industry Classification System (NAICS). (This is a list of hospitality and entertainment businesses like restaurants, hotels, and casinos; click the link to get the full list.)
• $2 million

Yes, as long as you are eligible and can adhere to the terms of the loan. With the creation of the new bill, Congress has set aside allocations for community lenders and institutions that can help smaller businesses, businesses owned by POC, and those who operate in lower-income areas access capital.

A portion of funding is being directed to Community Development Financial Institutions (CDFIs) and Minority Depository Institution (MDIs). These are community lenders who have committed to expanding economic opportunity for underserved people. Not only are portions of the PPP allocated for these lenders, but also outside of PPP funds; $12 billion is being routed to CDFIs and MDIs. This means that even if the community lenders in your area aren’t supporting PPP, they may be offering other loans with federal funds under the Consolidated Appropriations Act, 2021.

Yes. Within 17 days of the enactment of this bill, the SBA is required to release guidance to lenders on allowing borrowers who have returned loans to access PPP capital.