Round 2: PPP Funding Distribution

It is anticipated that this round will open Jan. 11 for the first draw. 

Congress has set aside funds for new and smaller borrowers, for borrowers in low- and moderate-income communities, and for community and smaller lenders.

These set asides include:

• $15 billion across first and second draw PPP loans for lending by community financial institutions;
• $15 billion across first and second draw PPP loans for lending by Insured Depository Institutions, Credit Unions, and Farm Credit System Institutions with consolidated assets of less than $10 billion;
• $35 billion for new first draw PPP borrowers; and
• $15 billion and $25 billion for first draw and second draw PPP loans, respectively, for borrowers with a maximum of 10 employees or for loans less than $250,000 to borrowers in low-or moderate-income neighborhoods. SBA has determined that at least 25 percent of each of those set-asides will go to each one of the groups: loans to borrowers with a maximum of 10 employees and loans less than $250,000 to borrowers in low-or moderate-income neighborhoods.

Eligible Entities

The Economic Aid Act makes first-draw PPP loans available to borrowers that were in operation on Feb. 15, 2020, and come from one of the following groups:

• Businesses with 500 or fewer employees that are eligible for other SBA 7(a) loans.
• Sole proprietors, independent contractors, and eligible self-employed individuals.
• Not-for-profits, including churches.
• Accommodation and food services operations (those with North American Industry Classification System (NAICS) codes starting with 72) with fewer than 500 employees per physical location.
• Sec. 501(c)(6) business leagues, such as chambers of commerce, visitors’ bureaus, etc., and “destination marketing organizations” that have 300 or fewer employees and do not receive more than 15% of receipts from lobbying. The lobbying activities must comprise no more than 15% of the organization’s total activities and have cost no more than $1 million during the most recent tax year that ended prior to Feb. 15. 2020.
• News organizations that are majority-owned or controlled by a NAICS code 511110 or 5151 business or not-for-profit public broadcasting entities with a trade or business under NAICS code 511110 or 5151. The size limit for this category is no more than 500 employees per location.

Publicly traded companies and businesses controlled, either directly or indirectly, by the president, vice president, head of executive departments, and members of Congress (or their spouses as defined by applicable common law) are not eligible for PPP loans.

Eligible Expenses

PPP borrowers can have their first- and second-draw loans forgiven if the funds are used on eligible costs. As with the first round of the PPP, the costs eligible for loan forgiveness in the revised PPP include payroll, rent, covered mortgage interest, and utilities. In addition, the following costs are now eligible:

• Covered worker protection and facility modification expenditures, including personal protective equipment, to comply with COVID-19 federal health and safety guidelines.
• Covered property damage costs related to property damage and vandalism or looting due to public disturbances in 2020 that were not covered by insurance or other compensation.
• Expenditures to suppliers that are essential at the time of purchase to the recipient’s current operations.
• Covered operating expenditures, which refer to payments for any business software or cloud computing service that facilitates business operations; product or service delivery; the processing, payment, or tracking of payroll expenses; human resources; sales and billing functions; or accounting or tracking of supplies, inventory, records, and expenses.
• To be eligible for full loan forgiveness, PPP borrowers will have to spend no less than 60% of the funds on payroll over a covered period between eight or 24 weeks.
• Borrowers that receive a PPP loan of $150,000 or less shall receive forgiveness if the borrower signs and submits to the lender a certification that is not more than one page in length, includes a description of the number of employees the borrower was able to retain because of the loan, the estimated total amount of the loan spent on payroll costs, and the total loan amount.

Additional Details

To efficiently and effectively implement the Economic Aid Act and to ensure increased access to PPP
for minority, underserved, veteran, and women-owned business concerns, SBA is undertaking the
following steps:

• Accept PPP loan applications only from community financial institutions for at least the first two days when the PPP loan portal re-opens;
• Direct Lender Match borrower inquiries to small lenders who can aid traditionally underserved communities;
• Match small businesses through Lender Match with Certified Development Companies (CDCs), Farm Credit System lenders, microloan intermediaries, and traditional smaller asset size lenders;
• Continue setting aside dedicated hours to process and assist our smallest PPP lenders with their PPP loans;
• Continue to strongly encourage CDFIs and minority-, women-, veteran-, and military-owned lenders to apply to become PPP lenders. SBA will give full and prompt consideration to these applications to become PPP lenders consistent with program guidelines, including in cases where the lender does not meet all of the requirements listed on the updated SBA Form 3507;
• Continue to use SBA’s 68 district offices and network of SBA Resource Partners to further create awareness among the public about these approaches. Minority, underserved, veteran, and women-owned businesses that encounter difficulties in obtaining a PPP Loan should contact their local SBA district office for assistance. A link on how to find an office near you can be found via www.sba.gov/local-assistance.

Source: Journal of Accountancy