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PAYCHECK PROTECTION PROGRAM (PPP) UPDATE

On December 27th, 2020 President Trump signed legislation into law that includes new funds for another round of PPP, and enhancements to the original guidelines.  Specific guidance from the Small Business Administration (SBA) is expected soon! 

Second Round of Paycheck Protection Program (PPP2) Loans

On December 27, 2020, President Trump signed into law legislation that includes $284 billion for the Paycheck Protection Program.  While the final parameters for use of the funds will be subject to subsequent guidance from the Small Business Administration (SBA), we have included some key provisions below.

For Businesses that DID NOT receive a PPP loan during the first round (PPP1)

We anticipate the PPP2 loan parameters are generally the same as those for PPP1, with the following key exceptions:

  • Maximum loan amount is now $2 million
  • Must have 300 or fewer employees (excluding NAICS code 72 businesses)
  • Restaurants and hotels (NAICS code 72 will be eligible for 3.5x avg. monthly payroll) and all other businesses will be eligible for 2.5x
  • Additional types of expenses are now eligible for forgiveness
  • PPP2 Loans under $150,000 will have a one-page forgiveness application
  • 501(c)(6) organizations that are not lobbying organizations such as chambers of commerce, trade associations, and boards of trade are now eligible if they have fewer than 150 employees

For Businesses that DID receive a PPP loan during the first round (PPP1)

Can apply for a PPP2 loan under the following general parameters:

  • Businesses must have 300 or fewer employees
  • Sustained a loss of revenue of 25% or greater during any quarter in 2020 when compared to the same quarter in 2019
  • Restaurants and hotels (NAICS code 72 will be eligible for 3.5x avg. monthly payroll) and all other businesses will be eligible for 2.5x
  • Maximum loan amount $2 million; aggregate total of PPP1 and PPP2 loans cannot exceed the initial $10 million cap
  • Additional types of expenses are now eligible for forgiveness (if your PPP1 loan has already been forgiven, it is excluded from this change)
  • PPP2 Loans under $150,000 will have a one-page forgiveness application (can be used for PPP1 loan if not already forgiven)

Updates to the First Draw PPP lending guidelines have recently been authorized under the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act.

If D.L. Evans Bank was your lender on your First Draw Paycheck Protection Program (“PPP”) loan, AND the corresponding Forgiveness Application has not been submitted by the Bank to the SBA, you may be eligible to reapply for an additional advance on your First Draw PPP loan.

Additional advances may be available under the following circumstances:

  • Partner Compensation (if evidenced via Form 1065 K-1, Box 14a) excluded previously in the payroll calculation
  • Schedule C net profit excluded previously in the payroll calculation (pending verification on this one)
  • Schedule F compensation excluded previously in the payroll calculation (can use Gross Revenue up to $100,000 to calculate in lieu of Net Profit)
  • Borrower returned all or part of First Draw PPP funds
  • Borrower did not accept the full amount approved for the First Draw PPP loan

If you think you may qualify for an additional advance under the circumstances describe above, please reach out to myself or your loan officer; any additional advance needs to be completed prior to the bank submitting your forgiveness application to the SBA.

One of the key PPP enhancements for Borrowers included in the new legislation is a new Single Page Forgiveness Application for loans of $150,000 and less. The SBA has 24 days from enactment of the new law to create the form; once received, we will be making the form available for use through our Forgiveness Portal. If your forgiveness application has not already been submitted to the SBA, the following are some reasons you may want to consider waiting for the new form:

  • Shorter, simpler form without the need to submit supporting documentation to the lender
  • Faster processing by the bank due to limited bank review requirements
  • Would allow time for guidance related to the use of additional expenses that are now eligible for forgiveness

Section 1110(e)(6) of the CARES Act required Economic Injury Disaster Loan (EIDL) Advance payments be deducted from the Forgiveness amount approved for our Borrowers. The new legislation repealed this section of the CARES Act

If you have already completed the forgiveness process and had your EIDL advance netted out from the payment received by us from the SBA, we anticipate the SBA remitting funds sufficient to pay the balance of the EIDL advance plus the corresponding accrued interest.  PAYMENTS ON THESE PPP LOANS ARE DEFERRED UNTIL FURTHER NOTICE.  The SBA should be providing more detail on the process and timing for EIDL related reimbursements in the near future.