The National Sea Grant Law Center


  • SBA Accepting New Paycheck Protection Program Applications after Congress Modifies the Program

  • January 21th, 2021 — by Catherine Janasie — Category: COVID-19 PPP

  • At the end of December, Congress passed the Consolidated Appropriations Act, 2021 (H.R. 133), which President Trump signed into law December 27, 2020. The $2.3 trillion spending bill included regular appropriations for a variety of federal agencies and a number of other pieces of legislation. At over 5,593 pages, it was the longest bill ever passed by Congress.

    Among its provisions, the Consolidated Appropriations Act (Act) provided $900 billion in economic stimulus for COVID-19 relief, including more funds for the Paycheck Protection Program (PPP). The U.S. Small Business Administration (SBA) runs the PPP, which the CARES Act created as a form of relief for small businesses struggling to pay their employees. The new PPP provisions may be of interest to coastal small businesses throughout the United States.

    Many aspects of the PPP have stayed the same since the passage of the PPP Flexibility Act this summer, but Congress did make some changes when it reauthorized the PPP in December. The PPP still allows eligible entities that were impacted by COVID-19 to apply for a first-time PPP loan, known as a First Draw Loan. Besides traditional small businesses, eligible entities for First Draw Loans include sole proprietors, independent contractors, self-employed persons, non-profits, veterans organizations, and tribal business concerns. Congress also created the opportunity for qualifying entities that have already received a PPP loan to apply for a second one, known as a Second Draw Loan. Congress, however, limited the eligibility for these types of loans, as shown in the chart below. Borrowers seeking First and Second Draw loans must apply through an approved lender, who then forwards the application to the SBA. Borrowers can receive a PPP loan equal to 2.5 times the business’s average monthly payroll costs - the loan application specifies how to calculate this amount.

      First Draw Loan Second Draw Loan
    Eligibility Less than 500 employees; or

    Meets the SBA industry size standard if more than 500 employees.
    Have 300 or fewer employees;

    Has/will have used full amount of previous PPP loan for authorized uses; and

    Can show 25% reduction in gross receipts between comparable quarters in 2019 and 2020.

    Max Loan Amount $10 million $2 million

    Other notable changes enacted by Congress in December include:

    • Updating the eligible expenses that can be paid with a PPP loan to now include payroll, business-related mortgage interest, rent and utilities payments, worker protection costs related to COVID-19, uninsured property damage costs caused by looting or vandalism in 2020, and certain supplier costs and expenses for operations.
    • Specifying that expenses paid with a PPP loan can be tax-deductible business expenses.
    • Allowing accommodation and food services operations with less than 500 employees per physical location to receive up to 3.5 times their average monthly payroll costs on Second Draw Loans.

    Finally, the reauthorized PPP puts a focus on underserved and disadvantaged communities. In addition to the SBA initially opening the PPP application window exclusively to applications from community financial institutions that serve minority- and women-owned businesses, the Act also includes set asides ($15 and $25 billion for First and Second Draw Loans respectively) for certain small businesses and loans, including:

    • Businesses with less than ten employees; and
    • Loans less than $250,000 to eligible borrowers in low- or moderate-income communities, which are defined based on the Community Reinvestment Act. A low-income community has a median family income of less than 50% of the area median income, while a moderate-income community has median family income between 50 and 80% of the area median income.

    Businesses who are interested in applying for a PPP loan need to be aware of a couple important dates. As of January 19, 2021, the SBA application portal is now open to all lenders. Borrowers should be working with their lender on their loan application, as Congress has set the deadline for application submissions as March 31, 2021. SBA has provided a lender match tool for those borrowers who need help locating an approved lender.

    Important PPP Dates

      January 11, 2021
    • First Draw Loan Applications accepted from community financial institutions (CFIs) that serve minority- and women-owned businesses.

    • January 13, 2021
    • Second Draw Loan Applications accepted from CFIs that serve minority- and women-owned businesses.

    • January 15, 2021
    • First and Second Draw Loan Applications accepted from CFIs and lenders with under $1 billion in assets (about 5,000 institutions), including community banks, credit unions, and farm credit institutions.

    • January 19, 2021
    • First and Second Draw Loan Applications accepted from all lenders.

    • March 31, 2021
    • PPP Application deadline.

    As with the first round of the PPP program, the SBA has issued guidance, including for both First Draw and Second Draw PPP loans, and is likely to continue to do so. Further, with the change of administrations, additional changes to the PPP could be on the horizon and borrowers should continue to monitor the program closely.

  • Catherine Janasie
    Senior Research Counsel

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