Insights
PPP 2.0
The 2021 Consolidated Appropriations Act was signed into law on December 27, 2020. It includes $284 billion of new funding for small business loans and provides additional funding for PPP loans, along with some important changes. Certain key points of the law are summarized below. Please contact your Wyrick Robbins attorney if you have additional questions.
- PPP loans in this phase are available through March 31, 2021
- First-time PPP borrowers will remain subject to the original program eligibility rules
- The scope of eligible expenses has been expanded, now including qualifying operational expenses, property damage costs, supplier costs and worker-protections expenditures (60% of the loan proceeds must be used for payroll costs)
- Program will permit “second draw” loans (sometimes also referred to as a “PPP2 loan” or “PPP 2.0”) for borrowers that have already received a PPP loan, subject to additional restrictions:
- Borrower must certify that it has experienced a loss of revenue of 25% or more in any quarter of 2020 versus the corresponding quarter in 2019
- Must have 300 employees or less (versus the 500 employee limit for “first draw” PPP loans)
- Borrower must had exhausted the proceeds from its original PPP loan
- $2 million loan limit for “second draw” PPP loans
- It is still the case that forgiven loan amounts will not be taxable to borrowers (for both primary and “second draw” PPP loans), but the new law confirms that businesses can also deduct expenses that the loan proceeds cover
- Increased loan size cap for restaurants and food service businesses, up from 2.5x the average monthly payroll costs to 3.5x (all other borrowers remain capped at 2.5x)
- Simplified “one-pager” forgiveness applications for PPP loans under $150,000
- 501(c)(6) entities, such as trade associations and lobbying firms are eligible to apply, subject to certain exclusions and limitations
- Public companies are excluded from this round of PPP
- The SBA is expected to release guidance on this round of PPP (including with regard to loan and forgiveness applications) in January 2021