On January 8th, 2021, the Small Business Administration (SBA) made an announcement regarding updates to the Paycheck Protection Program (PPP). The U.S. Department of the Treasury also consulted on the press release. The final version of the Consolidated Appropriations Act of 2021 (CAA) includes the PPP updates.
Important PPP Funding Information
Under the new rules, the program reopened the week of January 11 for new borrowers and certain existing PPP borrowers. To promote access to capital, however, initially only community financial institutions will be able to make “First Draw” PPP Loans. First Draw PPP Loans are those created for businesses that have never received previous PPP funding. First Draw PPP Loans were available for funding on Monday, January 11. “Second Draw” PPP Loans, only available for businesses that previously received PPP funding, was available on Wednesday, January 13. (Readers can find more information on Second Draw PPP Loans below.) After this first week, the PPP will open to all participating lenders shortly thereafter.
Included within the latest round of PPP funding is $284 billion earmarked toward job retention through March 31st, 2021. According to the SBA, so far, the Paycheck Protection Program has provided 5.2 million loans worth $525 billion to small businesses. Accordingly, this has supported more than 51 million jobs.
PPP Updates
Key updates to this round of the Paycheck Protection Program include the following:
- Borrowers now set their PPP loan’s covered period to be any length between 8 and 24 weeks to best meet their business needs;
- PPP loans now cover additional expenses, including operations expenditures, property damage costs, supplier costs, and worker protection expenditures;
- Eligibility now includes 501(c)(6)s, housing cooperatives, destination marketing organizations, among other types of organizations;
- The PPP provides greater flexibility for seasonal employees;
- Certain existing PPP borrowers can request to modify their First Draw PPP Loan amount; and
- Some existing PPP borrowers are now eligible to apply for a Second Draw PPP Loan.
Employer Takeaways
Employers interested in First or Second Draw PPP Loans can apply through any existing SBA 7(a) lender. Specifically, they can submit applications to any participating federally-insured depository institution, federally-insured credit union, and Farm Credit System institution. Other regulated lenders will be available to make these loans once approved and enrolled in the program. Employers should consult with their local lender to find out if it is participating in the program.