Paycheck Protection Program 2.0: What You Need to Know

Paycheck Protection Program 2.0: What You Need to Know

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On January 11, 2021, the Small Business Administration (SBA), in coordination with the U.S. Department of Treasury, reopened the Paycheck Protection Program (PPP) portal to begin the application process for the $285.45 billion in funds allocated to assist small businesses that continue to struggle due to the COVID pandemic. Similar to the first round of PPP loans, funds can be used to cover payroll and benefits, mortgage interest, rent, and utilities. Additionally, borrowers may apply funds towards worker protection costs related to COVID-19, uninsured property damage costs caused by looting or vandalism during 2020, and certain supplier costs and expenses for operations. The program will be rolled out in two parts – First Draw PPP Loans and Second Draw PPP Loans.

FIRST DRAW PPP LOANS
To help ensure access for all, the initial period is limited to First Draw PPP Loans from participating community financial institutions (CFIs), which include Community Development Financial Institutions (CDFIs), Minority Depository Institutions (MDIs), Certified Development Companies (CDCs), and Microloan Intermediaries. A minimum of $15 billion is allocated for First Draw PPP Loans to eligible borrowers with up to 10 employees or for loans of $250,000 or less to eligible borrowers in low- or moderate-income neighborhoods. Click HERE to find an eligible Arizona First Draw PPP Loan lender.

Borrower Eligibility
Businesses with 500 or fewer employees that did not receive a PPP loan before the program closed in August 2020 are eligible to apply for First Draw PPP loans. Businesses with more than 500 employees may be eligible if they meet the SBA’s alternative size standard for their particular industry.

Existing PPP borrowers that did not receive loan forgiveness by December 27, 2020 may:

  • reapply for a First Draw PPP Loan if they previously returned some or all of their First Draw PPP Loan funds, OR
  • under certain circumstances, request to modify their First Draw PPP Loan amount if they previously did not accept the full amount for which they are eligible.

Application Deadline
The application deadline for First Draw PPP Loans is March 31, 2021.

Forgiveness
Eligible First Draw PPP Loan borrowers qualify for full loan forgiveness if, during the 8- to 24-week covered period following loan disbursement, they maintain employee and compensation levels and spend funds on eligible expenses, with a minimum of 60 percent of the loan allocated to payroll costs.

SECOND DRAW PPP LOANS
On January 13, 2021, the SBA opened the portal for Second Draw PPP Loans from participating CFIs. The PPP will open to all participating lenders for Second Draw PPP Loans shortly thereafter. A minimum of $25 billion is allocated for Second Draw PPP Loans to eligible borrowers with a maximum of 10 employees or for loans of $250,000 or less to eligible borrowers in low- or moderate-income neighborhoods.

Borrower Eligibility
Borrowers with 300 employees or less that previously received a First Draw PPP loan and will or have used the full amount on qualified expenses are eligible to apply for Second Draw PPP Loans. They must also show a 25% reduction in gross receipts between comparable quarters in 2019 and 2020 to qualify for round two.

Loan Amount Limit
Second Draw PPP Loan Amounts are limited to 2.5x the average monthly 2019 or 2020 payroll costs up to $2 million, except for borrowers in the Accommodation and Food Services industries, which allows a maximum loan amount of 3.5x the average monthly 2019 or 2020 payroll costs up to $2 million.

Application Deadline
The application deadline for Second Draw PPP Loans is March 31, 2021.

Forgiveness
Eligible Second Draw PPP Loan borrowers qualify for full loan forgiveness if, during the 8- to 24-week covered period following loan disbursement, they maintain employee and compensation levels in the same manner as required for the First Draw PPP loan and spend funds on eligible expenses, with a minimum of 60 percent of the loan allocated to payroll costs. Also, unlike for First Draw PPP loans, borrowers with a principal balance of $150,000 or less must submit documentation demonstrating revenue reduction if not already provided.

WE ARE HERE TO HELP
If you have questions regarding First Draw or Second Draw PPP loans, are unsure about your eligibility, or need any other PPP-related assistance, please contact us at 602.776.6300 or [email protected]

Nicole Wolski WEBSITE
Nicole Wolski

Staff Accountant

602.776.6341

[email protected]

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