PPP Loans Have Been Extended

Yesterday, the Senate voted to extend the Small Business Administration (SBA)’s Paycheck Protection Program (PPP), as it was set to expire at the end of the month.

The PPP Extension Act of 2021 extends the program by 2 months—to May 31 instead of the current March 31 deadline. It also gives the SBA another 30 days to process loans. Next, the bill will be sent to President Joe Biden to be signed into law.

The PPP is part of the CARES Act, which was originally signed into law on March 27, 2020. In December 2020, additional funding for new PPP loans (if you didn’t get a PPP loan previously) and the ability to obtain a second PPP loan for certain small businesses was passed as part of the Consolidated Appropriations Act.

We’ve covered this topic before, and have consolidated the pertinent information below.

What You Need to Know

The SBA opened the Paycheck Protection loan portal on Monday, January 11. Initially, it only accepted first draw PPP loan applications from Community Development Financial Institutions, Minority Depository Institutions, Certified Development Companies, and Microloan Intermediaries.

So, if you hadn’t already received a PPP loan, then you could apply for one. The calculation of the maximum loan amount remained the same: 2.5 times the average monthly payroll costs, and the cap stayed at $10 million.

If you did receive an initial PPP loan, but your company still needs financial support, you can apply for a second draw loan. For second draw PPP loans, the maximum loan amount is $2 million. The following provisions apply:

• The entity must have fewer than 300 employees,
• You must have used all of the proceeds from your first PPP loan,
• You must have had a reduction of gross receipts of 25% or more in any quarter of 2020 (vs. the same quarter in 2019), and
• The funds must be used within 24 weeks.

Second draw PPP funds can still be used on payroll, rent, covered mortgage interest, and utilities (same as the CARES Act). However, the Consolidated Appropriations Act adds certain business software and cloud computing services, uninsured property losses caused by civil unrest, payments for goods that are essential to the operation of the entity, and PPE to the list of allowable expenditures.

For loans under $150,000, the forgiveness application will be simplified to a one-page certification. You can apply for either a first-time or a second draw PPP loan through any existing SBA 7(a) lender. Although there is an application available on the SBA website (SBA.gov), you will use the application form developed by your bank to apply for the loan.

For more detailed information and loan resources, see SBA guidance for details. BPA has also compiled a list of COVID-19 resources for the industry.