SBA Paycheck Protection Program (PPP) Update

The United States Small Business Administration (“SBA”) started to accept PPP loan applications from Small Lenders on Friday, January 15th, for First and Second Draw Loans, and all other Lenders on Tuesday, January 19, 2020, for First and Second Draw Loans.

First Draw PPP Loans

  • The rules for first-time borrowers are largely the same of the original program.
  • Eligibility: New borrowers that were in operation on February 15, 2020 and that fall into the categories below are eligible for a First Draw Loans:
    • Certain businesses with 500 or fewer employees;
    • Sole proprietors, independent contractors, and self-employed individuals;
    • Nonprofits or business leagues; and
    • Restaurants, hotels, and other similar establishments with less than 500 employees.

Second Draw PPP Loans

  • Eligibility: Previous PPP recipients may apply for another loan, provided they:
    • Have used or will use the full amount of their First Draw Loan for eligible uses on or before the expected date on which the
    • Second Draw Loan will be disbursed;
    • Have 300 or fewer employees at the time of the application; and
    • Can show a 25% or greater gross revenue decline in any 2020 quarter, as compared to the same quarter in 2019.
  • Second Draw PPP loans are generally subject to the same terms as the original PPP loans. That includes: (1) the 100 percent SBA guarantee; (2) no collateral requirement; (3) no personal guarantee requirement; (4) a non-compounding and non-adjustable interest rate of one percent, a five-year maturity; (5) similar borrower eligibility and certification requirements; and (6) similar processing requirements for lenders administering the Second Draw PPP.

Eligible Expenses: The costs eligible for loan forgiveness still include payroll, rent, covered mortgage interest, and utilities. The Economic Aid Act adds new types of eligible expenses: covered operations expenditures, covered property damage costs, covered supplier costs, and covered worker protection expenditures.

Full Forgiveness Terms: First and Second Draw PPP Loans made to eligible borrowers qualify for full loan forgiveness if during the 8- to 24-week covered period following loan disbursement:

  • Employee and compensation levels are maintained;
  • The loan proceeds are spent on payroll costs and other eligible expenses; and
  • At least 60 percent of the proceeds are spent on payroll costs.

How and when to apply: You can apply for a First Draw PPP Loan until March 31, 2021. To promote access for smaller lenders and their customers, SBA will initially only accept Second Draw PPP Loan applications from participating community financial institutions (CFIs). All new First Draw PPP Loans will have the same terms regardless of lender or borrower.
To be matched with a participating PPP lender, visit SBA Lender Match.