Second Round of Paycheck Protection Loans Available to Small Businesses

On December 21, 2020, Congress passed the Consolidated Appropriations Act, 2021, which includes a relief package consisting of $900 billion in aid to small businesses and individuals impacted by COVID-19. Included in that amount is approximately $285 billion for a second round of PPP loans.

First-time borrowers and prior PPP borrowers are both eligible for this funding, regardless of whether any previous PPP loans have been re-paid or forgiven. The loans are available to businesses with 300 or fewer employees which had gross receipts during the first, second, third, or fourth quarter in 2020 that demonstrate at least a 25% reduction from the gross receipts of the entity during the comparable quarter in 2019.

Specifically, a borrower is generally eligible for a Second Draw PPP Loan if the borrower:

  • Previously received a First Draw PPP Loan and will or has used the full amount only for authorized uses;
  • Has no more than 300 employees; and
  • Can demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020.

For new and prior PPP loans, 60% of the loan must be used for payroll costs in order to qualify for forgiveness, however the 40% nonpayroll costs have been expanded to include new expense items in addition to rent, mortgage interest payments and utilities. In addition to payroll costs, covered mortgage, rent, and utility payments, the Act makes the following additional expenses allowable uses and eligible for forgiveness:

  • Covered operations expenditures - payment for any software, cloud computing, and other human resources and accounting needs.
  • Covered property damage costs - costs related to property damage due to public disturbances that occurred during 2020 that are not covered by insurance.
  • Covered supplier costs - expenditures to a supplier pursuant to a contract, purchase order, or order for goods in effect prior to taking out the loan that are essential to operations at the time at which the expenditure was made.
  • Covered worker protection expenditure - personal protective equipment and adaptive investments to help a loan recipient comply with federal health and safety guidelines or any equivalent State and local guidance related to COVID-19 during the period between March 1, 2020, and the end of the national emergency declaration.

On January 7, 2021, the U.S. Small Business Administration (SBA), in consultation with the Treasury Department, announced that the PPP will re-open the week of January 11, 2021 for new borrowers and certain existing PPP borrowers.

We will continue to monitor ongoing updates to the PPP Program as they arise. To better understand how the changes impact your unique situation, please contact ALG.