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The Small Business Administration (“SBA”) and the Department of Treasury released the Paycheck Protection Program (“PPP”) applications for first draw or second draw borrowers and has begun the rollout for accepting applications for new PPP loans.  This new round of PPP funding is part of the Stimulus Bill, H.R. 133, which was passed in December 2020.  Because there are separate applications for first-time and second-time borrowers, businesses want to make sure they are using the correct application. 

PPP Application Dates 

On Monday January 11, 2021, the SBA began accepting applications from community financial institutions (“CFIs”) for first-time PPP borrowers.   On Wednesday, January 13, 2021, CFIs were able to start accepting applications from second draw borrowers.  CFIs typically help underserved small businesses, such as minority and women owned businesses.

For lenders with $1 billion or less in assets, typically local community banks, the application window opened on Friday, January 15, 2021, at 9:00 am EST.

For all other lending institutions, the SBA will begin to accept PPP applications on January 19, 2021.

This rounds presents a new twist.  Each PPP application will now go through a series of automated checks before a loan number is issued to the borrower.  The SBA’s purpose is to minimize potential fraud, which might slow down the application process and add an additional day to the process overall.

PPP2 Terms and Conditions:

The second round of PPP loans are generally subject to the same terms and conditions as the first round, which include the following:

  • For loans that are not forgivable, the interest rate is 1%, with a 5-year loan term;
  • PPP loans are 100% guaranteed and backed by the federal government;
  • No personal guarantees or collateral are required;
  • No fees; and
  • Borrowers who apply for loan forgiveness will have their payments deferred until SBA makes a decision on forgiveness.

Overview of PPP Applications: 

First draw and/or second draw borrowers may now choose either calendar year 2019 or 2020 as the base period for calculating their PPP 2 loan.

First Draw Borrower Application:

  • Now available to borrowers who were in operation on February 15, 2020.
  • Available for sole proprietors, partnerships, corporations, limited liability companies, independent contractors, self-employed individuals, 501(c)(3) nonprofit, 501(c)(6) organization, 501(c)(19) veteran organization, housing cooperative, and tribal business.
  • 500 or fewer employees.
  • First-time borrowers may receive a loan amount of up to 2.5 times their average monthly payroll costs.
  • Loans are capped at $10 million.
  • A borrower’s loan may qualify for forgiveness if the borrower uses the funds for payroll costs, rent/mortgage, utilities, covered worker protection and facility modification expenditures, covered property damage costs, covered payments to suppliers, payments for business software or cloud computing services that facilitate business operations, product or service delivery, and a number of back-office functions, such as accounting.
    • Simplified loan forgiveness for loans that are $150,000 or less, which makes the forgiveness process much simpler and less burdensome.
  • Borrowers must certify and attest, among other things, that the borrower’s “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.”

Second Draw Borrower Application:

  • Available for sole proprietors, partnerships, corporations, limited liability companies, independent contractors, self-employed individuals, 501(c)(3) nonprofit, 501(c)(6) organization, 501(c)(19) veteran organization, housing cooperative, and tribal business who previously received a PPP loan.
  • Businesses with 300 or fewer employees
  • For businesses with a revenue reduction of 25% or more in all or part of 2020 compared with all or part of 2019.
    • This is calculated by comparing the borrower’s gross receipts in any 2020 quarter with an applicable quarter in 2019. A borrower can also submit annual returns comparing 2019 to 2020.
    • Borrowers seeking loans of $150,000.00 or less are not required to submit this information as part of the application, but must provide documentation upon or before seeking loan forgiveness, or upon the SBA’s request.
  • Second-time borrowers must have already used or will use the full amount of their first PPP loan on or before the expected date for the second PPP loan disbursement.
  • Second-time borrowers may receive a loan amount of up to 2.5 times their average monthly payroll costs. However, if the business operates under NAISC code 72 (hotel or restaurant), then the borrower may receive up to 3.5 times their average monthly payroll costs.
  • Loans are capped at $2 million.
  • Borrower’s loan may qualify for forgiveness if the borrower uses the funds for payroll costs, rent/mortgage, utilities, covered worker protection and facility modification expenditures, covered property damage costs, covered payments to suppliers, payments for business software or cloud computing services that facilitate business operations, product or service delivery, and a number of back-office functions, such as accounting.
    • Simplified loan forgiveness for loans that are $150,000 or less, which streamlines the forgiveness process.
  • Eligible borrowers must certify and attest, among other things, that the borrower’s “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.”

Should you have any questions about the new stimulus bill, please contact Nathan Duggins at nduggins@tuggleduggins.com or (336) 271-5246, Michael Wenig at mwenig@tuggleduggins.com or (336) 271-5216, Ross Hamilton at rhamilton@tuggleduggins.com or (336) 271-5279, Daniel Stratton at dstratton@tuggleduggins.com or (336) 271-5232.

© 2021 Tuggle Duggins P.A. All Rights Reserved. The purpose of this bulletin is to provide a general summary of significant legal developments. It is not intended to constitute legal advice or a recommended course of action in any given situation. It is not intended to be, and should not be, relied upon by the recipient in making decisions of a legal nature. Moreover, information contained in this bulletin may have changed subsequent to its publication. This bulletin does not create an attorney-client relationship between Tuggle Duggins P.A. and the recipient. Therefore, please consult legal counsel before making any decisions or taking any action concerning the issues discussed herein.

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