(iii) If a borrower meeting the criteria in subsection (6)(i) of this section has employees, the maximum loan amount is calculated as the lesser of: (1) The sum of (i) the difference between gross income and employee payroll costs of the borrower in 2019 or 2020 (at the election of the borrower), as reported on a Schedule F (IRS Form 1040), that is not more than $100,000, divided by 12, and (ii) the average total monthly payment for employee payroll costs incurred or paid by the borrower during the same year elected by the borrower; by. Generally, receipts are considered total income (or in the case of a sole proprietorship, independent contractor, or self-employed individual gross income) plus cost of goods sold, and excludes net capital gains or losses as these terms are defined and reported on IRS tax return forms. (2) The affiliation rules under 13 CFR 121.301(f) are waived with respect to eligibility for a Second Draw PPP Loan for: (i) Any business concern with not more than 300 employees that, as of the date on which the covered loan is disbursed, is assigned a NAICS code beginning with 72; and, (ii) (A) any business concern (including any station which broadcasts pursuant to a license granted by the Federal Communications Commission under title III of the Communications Act of 1934 (47 U.S.C. This article includes those changes as they affect Second Draw PPP Loans. [14] 11. The PPP provided more than 11.7 million forgivable loans totaling nearly $800 billion to small businesses and other eligible entities hurt by the economic impacts of the COVID-19 pandemic. 28. For loans with a principal amount greater than $150,000, the applicant must also submit documentation adequate to establish that the applicant experienced a revenue reduction of 25% or greater in 2020 relative to 2019. the current document as it appeared on Public Inspection on The last day to apply for and receive a PPP loan is March 31, 2021. Only official editions of the 33. For loans greater than $150,000, Applicant has provided documentation to the lender substantiating the decline in gross receipts. Small Business Administration's Office of Advocacy guide: How to Comply with the Regulatory Flexibility Ac. In general, section 307 of the Economic Aid Act provides that the maximum loan amount for a Second Draw PPP Loan is equal to the lesser of two and half months of the borrower's average monthly payroll costs or $2 million. Subsection (f) of the IFR uses calendar year 2020 to refer to the twelve-month period prior to when the loan is made. Calculating payroll costs based on calendar year 2020 rather than the twelve months preceding the date the loan is made will simplify the calculations and documentation requirements for borrowers because payroll records are more commonly created and retained on a calendar-year basis. Subsection (e)(1) of the IFR implements this restriction. See paragraph 7(a)(37)(A)(iv) of the Small Business Act. For example, a borrower with gross receipts of $50,000 in the second quarter of 2019 and gross receipts of $30,000 in the second quarter of 2020 has experienced a revenue reduction of 40 percent between the quarters, and is therefore eligible for a Second Draw PPP loan (assuming all other eligibility criteria are met). 603, 604. Borrowers may consult PPP Frequently Asked Question (FAQ) 24[15] The Public Inspection page may also Ch.1. SBA will resolve the issue related to the unresolved borrower expeditiously and will notify the lender of the process to obtain an SBA loan number for the Second Draw PPP Loan, if appropriate. 04/17/2023, 242 that is not more than $100,000, divided by 12; (2) the average total monthly payment for employee payroll costs incurred or paid by the borrower during the same year elected by the borrower; by, (B) 2.5 (or, only for a borrower assigned a NAICS code beginning with 72 as defined in subsection (f)(10) at the time of disbursal, 3.5); or. (iii) No personal guarantees will be required. (C) was in business as of February 15, 2020; is calculated according to (ii) or (iii) of this subsection(e)(6), depending on whether the borrower has employees. January 14, 2021) and PPP Second Draw Loans (86 FR 3712, January 14, 2021). The RFA defines a small entity as (1) a proprietary firm meeting the size standards of the Small Business Administration (SBA); (2) a nonprofit organization that is not dominant in its field; or (3) a small government Start Printed Page 3723jurisdiction with a population of less than 50,000. 5 U.S.C. Paragraph 7(a)(37)(E) of the Small Business Act, as amended by the Economic Aid Act, applies the same Start Printed Page 3715waivers to Second Draw PPP Loans, adds a waiver for certain eligible news organizations, and makes adjustments to reflect the reduced size requirement for Second Draw PPP Loans. Subject to subsection (e) of this section, below, the following applicants are eligible for Second Draw PPP Loans: (1) An applicant is eligible for a Second Draw PPP Loan if it is a business concern, independent contractor, eligible self-employed individual, sole proprietor, nonprofit organization eligible for a First Draw PPP Loan, veterans organization, Tribal business concern, housing cooperative, small agricultural cooperative, eligible 501(c)(6) organization or destination marketing organization, or an eligible nonprofit news organization[33] 01/12/2021 at 4:15 pm. establishing the XML-based Federal Register as an ACFR-sanctioned Federal Register. 1503 & 1507. (iii) A lender may rely on any certification or documentation submitted by an applicant for a PPP loan or an eligible recipient or eligible entity that (A) is submitted pursuant to all applicable statutory requirements, regulations, and guidance related to a PPP loan, including under sections 7(a)(36) or (37) of the Small Business Act (15 U.S.C. headings within the legal text of Federal Register documents. Unlike First Draw PPP Loans, the Economic Aid Act provides that the relevant time period for calculating a borrower's payroll costs for a Second Draw PPP Loan is either the twelve-month period prior to when the loan is made or calendar year 2019. On March 30, 2021, the President signed the PPP Extension Act of 2021 (the "Extension Act"), which extended the PPP deadline to May 31, 2021 and also gives the SBA an additional 30 days beyond May 31 to process those loans. This post details these changes, as explained by the recent SBA guidance. [30] Subsection (B)(11) of the Consolidated First Draw PPP IFR specifies that the proceeds of a PPP loan may be spent only on certain eligible expenses. of the issuing agency. Paragraph 7(a)(37)(A)(iv)(III)(bb) of the Small Business Act. 301 et seq. This clarification will help ensure program integrity by preventing a borrower from receiving a Second Draw PPP Loan if the borrower has not complied with PPP loan program requirements.[6]. Official websites use .gov A .gov web belongs to an official government organization in the United States. No personal guarantees will be required. Principally, the Economic Aid Act authorizes further PPP funding and allows prior PPP borrowers to pursue second draw PPP loans. This good cause justification also supports waiver of the 60-day delayed effective date for major rules under the Congressional Review Act at 5 U.S.C. These credits are available to employers (except state and local governments and their instrumentalities and small business who . Learn more here. 15 U.S.C. 801 et seq.) In addition, as discussed below, under the Consolidated First Draw PPP IFR, SBA's affiliation rules (13 CFR 121.301) do not apply to any business entity that is assigned a NAICS code beginning with 72 and that employs not more than a total of 500 employees. This is because the SBA is prioritizing the disbursement of second draw loans. For an eligible nonprofit organization, a veterans organization, an eligible nonprofit news organization, eligible 501(c) organization, or eligible destination marketing organization, gross receipts has the meaning in section 6033 of the Internal Revenue Code of 1986. If you are applying for a second draw PPP loan, you need to make sure each number and name matches the first draw loan application exactly. 34. In addition, the Economic Aid Act provides that a Second Draw PPP Loan may only be made to an eligible borrower that (i) has received a First Draw PPP Loan, and (ii) has used, or will use, the full amount of the First Draw PPP Loan on or before the expected date on which the Second Draw PPP Loan is disbursed to the borrower. [20] All other items, such as subcontractor costs, reimbursements for purchases a contractor makes at a customer's request, investment income, and employee-based costs such as payroll taxes, may not be excluded from gross receipts. 636(a)(36); Coronavirus Aid, Relief, and Economic Security Act, Pub. 24. 1602), including any entity that is organized for research or for engaging in advocacy in areas such as public policy or political strategy or Start Printed Page 3719otherwise describes itself as a think tank in any public documents; (i) For which an entity created in or organized under the laws of the People's Republic of China or the Special Administrative Region of Hong Kong, or that has significant operations in the People's Republic of China or the Special Administrative Region of Hong Kong, owns or holds, directly or indirectly, not less than 20 percent of the economic interest of the business concern or entity, including as equity shares or a capital or profit interest in a limited liability company or partnership; or. These calculations are reflected in subsection (f) of this IFR. The Second Edition of this best-selling introduction for practitioners uses new (ii) If a borrower meeting the criteria in subsection (6)(i) of this section does not have any employees, the maximum loan amount is the product obtained by multiplying: (A) The gross income of the borrower in 2019 or 2020, as reported on a Schedule F (IRS Form 1040), that is not more than $100,000, divided by 12; and. 4. (B) any nonprofit organization that is assigned a NAICS code beginning with 5151. In place to avoid making superfluous PPP loan payments, loan must submit loan forgiveness applications to their lenders within 10 months free the end of their respective covered periods. should verify the contents of the documents against a final, official Certain 2020 first draw PPP loans were flagged with hold codes after SBA review. publication in the future. However, no additional documentation to substantiate payroll costs will be required if the applicant (i) used calendar year 2019 figures to determine its First Draw PPP Loan amount, (ii) used calendar year 2019 figures to determine its Second Draw PPP Loan amount (instead of calendar year 2020), and (iii) the lender for the applicant's Second Draw PPP Loan is the same as the lender that made the applicant's First Draw PPP Loan. More information and documentation can be found in our Subsection (c)(2) of the IFR clarifies that this definition, which generally relates to eligible nonprofit organizations, applies only to eligible nonprofit news organizations rather than to all eligible news organizations. 681); and (4)(a) any business concern (including any station which broadcasts pursuant to a license granted by the Federal Communications Commission under title III of the Communications Act of 1934 (47 U.S.C. [11] Paragraph 7(a)(37)(F) of the Small Business Act. The Economic Aid Act provides that, to be eligible for a Second Draw PPP Loan, the borrower must have experienced a revenue reduction of 25% or greater in 2020 relative to 2019. These procedures are designed to promote compliance with the eligibility requirements for Second Draw PPP Loans by preventing additional loans from being made to borrowers that were not eligible for a First Draw PPP Loan or received an impermissible loan amount. To be eligible for a Second Draw PPP Loan, a borrower must certify on SBA Form 2483-SD that, before the Second Draw PPP Loan is disbursed, the borrower will have used the full loan amount (including any increase) of its First Draw PPP Loan "only for eligible expenses." SBA will resolve issues related to unresolved borrowers expeditiously. The maximum for "second draw" PPP loans is $2 million, less than the $10 million cap for PPP's first round. implementing updates to the PPP. L. 116-260) into law to provide continued assistance to individuals and businesses that have been financially impacted by the ongoing coronavirus pandemic. The Second Draw PPP IFR confirms that the last day to "apply for and receive" a Second Draw PPP loan is March 31, 2021. (9) Businesses that are part of a single corporate group shall in no event receive more than $4,000,000 of Second Draw PPP Loans in the aggregate. [4] 9. The platform runs on top. (2) 2.5 (or, only for a borrower assigned a NAICS code beginning with 72 as defined in subsection (f)(10) at the time of disbursement, 3.5). Corporate group has the same meaning as in subsection (B)(4)(f) of the Consolidated First Draw PPP IFR. Eligible news organizations with a NAICS code beginning with 511110 or 5151 (or majority-owned or controlled by a business concern with those NAICS codes) may qualify for the affiliation waiver for Second Draw PPP Loans only if they employ 300 or fewer employees per physical location. At the same time, these procedures do not disqualify an eligible unresolved borrower from receiving a Second Draw PPP Loan, in recognition that many flags will be resolved in the borrower's favor. (ii) for a Second Draw PPP Loan of more than $50,000, in an amount that is: (A) 5 percent of the balance of the financing outstanding at the time of disbursement of the loan for a loan up to (and including) $350,000; and. --From publisher's description. edition of the Federal Register. Subsection (d)(2) implements these revised affiliation waivers. Allowing borrowers to calculate payroll costs based on calendar year 2020 is also not expected to result in a significant difference in payroll costs compared to the twelve months preceding the date the loan is made because all Second Draw PPP Loans will be made in the first quarter of 2021. Except for small government jurisdictions with a population of less than 50,000, neither State nor local governments are small entities.. (CRA). 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