Round Two of the PPP Up and Running as of Today

Big news for new and certain existing borrowers interested in obtaining loans (or additional loans) under the Paycheck Protection Program: starting today (January 11), the PPP is once again open for business. But there are caveats.

The U.S. Small Business Administration has announced that to promote access to capital, initially only community financial institutions will be able to make First Draw PPP Loans (to first-time borrowers) on Monday, January 11, and Second Draw PPP Loans (to those who already accessed PPP proceeds previously) on Wednesday, January 13. The PPP will open to all participating lenders shortly thereafter (an exact date has yet to be specified).

As Michelman & Robinson, LLP has previously reported, this round of PPP loans again prioritizes millions of Americans employed by small businesses by authorizing up to $284 billion toward job retention and certain other expenses through March 31, 2021, and by allowing certain existing PPP borrowers to apply for a Second Draw PPP Loan.

Additional Key PPP Updates

As a reminder, the following changes have been made relative to the latest incarnation of the loan program:

  • PPP borrowers can set their PPP loan’s covered period to be any length between 8 and 24 weeks to best meet their business needs
  • PPP loans will now cover additional expenses, including operations expenditures, property damage costs, supplier costs, and worker protection expenditures
  • The program’s eligibility is expanded to include 501(c)(6)s, housing cooperatives, and direct marketing organizations, among others
  • The PPP provides greater flexibility for seasonal employers
  • Certain existing PPP borrowers can request to modify their First Draw PPP Loan amount

Second Draw PPP Loans

A borrower is generally eligible for additional PPP funding (read: Second Draw PPP Loan) if it:

  • Previously received a First Draw PPP Loan and will or has used the full amount only for authorized uses
  • Has no more than 300 employees
  • Can demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020

Borrower Applications

The PPP borrower application forms released last Friday contain instructions on how to calculate payroll costs consistent with the guidance provided earlier in the week. In general, first- and second-time PPP borrowers may receive a loan amount of up to 2.5 times their average monthly payroll costs (with a cap per employee of $100,000 annualized) in 2019, 2020, or the year prior to the loan. For their part, PPP borrowers with North American Industry Classification System (NAICS) codes starting with 72 (such as hotels and restaurants) can receive up to 3.5 times their average monthly payroll costs on second-draw loans.

Of course, the lawyers in M&R’s COVID-19 Practice Group are available to assist with both the PPP application and loan forgiveness processes.

This blog post is not offered, and should not be relied on, as legal advice. You should consult an attorney for advice in specific situations.