New PPP Application Forms Released - January 2021

As part of the Consolidated Appropriations Act, which was signed into law on Dec. 27, 2020, the Paycheck Protection Program (PPP) was provided an additional $284.5 billion available in loans, with $35 billion designated for first-time loans and $15 billion designated for community financial institutions.  On Friday, Jan. 8, 2021, the Small Business Administration (SBA) and the U.S. Department of the Treasury (Treasury) released two new borrower loan application forms for borrowers to access the latest round of PPP funding.  Applications launched on Monday, Jan. 11 for a select group of lenders and borrowers before becoming more widely available later in the week.

The SBA issued top line overviews of both the first and second-draw loans in addition to releasing the following two forms last Friday:

Overview of New Forms

The following highlights key takeaways and aspects of the two new application forms for the PPP:

  • Borrowers seeking a PPP loan for the first time must have been in operations on Feb. 15, 2020, and be classified as one of the following:
    • Business with 500 or fewer employees who are eligible for other SBA 7(a) loans.
    • Sole proprietors, independent contractors and eligible self-employed individuals.
    • Certain non-profits.
    • Business with a North American Industry Classification System (NAICS) code beginning with 72 and have fewer than 500 employees per physical location (i.e., hotels, restaurants, etc.).
    • Section 501(c)(6) business leagues that have 300 or fewer employees and do not receive more than 15 percent of receipts from lobbying and costing no more than $1 million during the most recent tax year ended prior to Feb. 15, 2020 (not including sports leagues).
    • News organizations that are majority-owned or controlled by an NAICS code 51110 or 5151 business or not-profit public broadcasting entities with a trade or business under the aforementioned NAICS codes, and no more than 500 employees per location.
  • Borrowers seeking a second-draw PPP loan may do so in an amount of up to $2 million provided they meet the following qualifications:
    • Have 300 or fewer employees.
    • Must have received a first round PPP loan.
    • Used or plan to use the full amount of their first PPP loan before the second PPP loan is given to the borrower and the borrower has spent the full amount of the first PPP loan on eligible expenses.
    • Experienced a revenue deduction of 25 percent or more in all or part of 2020 compared with all or part of 2019.
  • Generally, first- and second-draw PPP borrowers may receive a loan amount of up to two and a half times their average monthly payroll costs, with a cap per employee of the annualized $100,000, for years 2019, 2020 or the year prior to the loan.
  • Borrowers with a NAICS code beginning with 72 can receive up to three and a half times their average monthly payroll costs on second-draw loans.

The second-draw PPP loan application still contains a certification from the first-draw PPP application that “Current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant”.  Potential second-draw borrowers should consider the continued certification, particularly if the second-draw loan will make aggregate first and second round PPP loans greater than $2 million and potentially require the borrower to complete the additional loan necessity questionnaires on Forms 3509 or 3510.  At this time, the SBA has not provided guidance on how aggregation rules will be applied for first and second-draw loans when determining whether the borrower will be subject to SBA review.

You can read more about the new guidance on PPP amendments in our most recently issued tax alert – SBA Issues New Guidance on PPP Amendments – including information on eligibility for the first- and second-draw PPP loans. For other questions, reach out to us at CARESActQuestions@dhg.com.

CONTRIBUTORS

Denny Ard
Managing Partner, DHG Solutions Lab
Denny.Ard@dhg.com
Bill Walter
Managing Director
Bill.Walter@dhg.com
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