|1||HR 748 – CARES Act||$ 349 billion||April 16, 2020|
|2||HR 266 – PPP and Healthcare Improvement Act||310 billion dollars||August 8, 2020|
|3||HR 133 – Consolidated Finance Law, 2021||$ 284 billion||March 31, 2021 *|
|* Or while funds are exhausted|
Sources: HR 748,HR 266,HR 133
PPP program changes announced by the Biden administration
The White House announced on February 22, 2021, five changes to the paycheck protection program, one with a fixed term of two weeks, the other four in effect until at least the end of March 2021. The changes were intended to make PPP funds available to very small businesses and others that had been under-assisted by the program, according to the Biden administration.
- From Wednesday February 24, 2021 to Tue March 9, 2021, companies with less than 20 employees have been allowed to apply for PPP funding.
- The formula used to calculate PPP loans has been revised to provide more financing for sole proprietors, independent contractors and self-employed workers. An additional $ 1 billion has been allocated to these people in low and moderate income (LMI) regions.
- Eligibility for P3 funding has been extended to small business owners who have committed non-fraud crimes as long as the applicant was not incarcerated at the time of application.
- Business owners with delinquent federal student loans were eligible for a P3 loan.
- Non-citizens who were legal residents of the United States were also eligible and allowed to use their Individual Tax Identification Number (ITIN) to apply.
First draw ready and second draw ready
The CAA provided for two types of third-round PPP loans, initial or first-draw loans up to $ 10 million, for entities that have never received a PPP loan, and second-draw loans up to $ 2 million. million dollars for the entities that received it.
As directed by the United States Small Business Administration (SBA) and Department of the Treasury, community financial institutions, including Community Development Financial Institutions (CDFI) started providing premier PPP loans Mon 11 Jan, and second-draw loans on Wednesday January 13. Small lenders with less than $ 1 billion in assets were to start lending in the first and second Fri 15 January and all approved PPP lenders were able to start lending on Tuesday, January 19, 2021.
Sources: HR 748, HR 266, and HR 133.
General terms and conditions of PPP Round 3
As a reminder, first and second draw PPP loans were subject (but not limited to) the same terms and conditions as the initial PPP loans under the CARES law, in particular:
- The loans are 100% guaranteed by the government.
- No guarantee is required.
- No personal guarantee is required.
- The interest rate for all loans is 1% and the term is five years.
PPP Round 3 eligible entities
While there are key differences between first and second draw PPP loans, the list of eligible entity types was the same.
- Small businesses with 500 or fewer employees (300 or less for second draw loans);
- Businesses classified under “Accommodation or food services,” such as restaurants and hotels with 500 or fewer employees per location (300 or less for second-draw loans);
- Independent franchises;
- Self-employed workers, independent contractors, concert workers and sole proprietors;
- 501 (c) (3) tax-exempt businesses or non-profit organizations; tax-exempt 501 (c) (19) veterans organizations; 31 (b) (2) (C) tribal cases;
- Housing cooperatives; organizations eligible under section 501 (c) (6) or eligible destination marketing organizations with 300 or fewer employees; and
- News organizations majority owned or controlled by a company of NAICS code 511110 or 5151 or a public not-for-profit broadcasting entity having a trade or business under NAICS 511110 or 5151 with 500 employees or less.
- In addition, the business must have been in operation on February 15, 2020.
Additional requirements for the second draw
Second-draw PPP loans had certain restrictions that first-draw loans did not. Businesses could not qualify for a second draw loan of up to $ 2 million unless they met the following conditions:
- Had received and used (or planned to use) all of the First Draw Loan Proceeds by the time you received (or expect to receive) the Second Draw Loan Proceeds.
- Had 300 employees or less.
- Could demonstrate that you suffered a loss of at least 25% of gross revenue in a quarter in 2020 compared to the same quarter in 2019.
- You have spent all of your First Drawdown loan proceeds on qualifying expenses.
Exclusions for second-draw borrowers
The guidelines for the third round had excluded you from a second drawdown loan if your business was:
- Closed permanently.
- Ineligible under existing SBA regulations;
- Mainly engaged in lobbying or other political activities;
- Owned by an entity established or having significant activities in the People’s Republic of China or the Hong Kong Special Administrative Region;
- Includes a board member who was a resident of the People’s Republic of China;
- Recipient of a closed site operator subsidy under section 24 of the Act.
Certifications required for PPP loans
Companies were required to certify that the economic uncertainty associated with the pandemic made the loan application necessary to support ongoing operations and that funds were to be used as needed, with no more than 40% for non-salary costs. This requirement applied to both first and second draw PPP loans.
New special funding reserved
The third round included special financing earmarked for specific groups of borrowers from the first and second draws.
- $ 15 billion for loans from community financial institutions;
- $ 15 billion for loans granted by deposit-taking institutions, credit unions and agricultural 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- and second-draw PPP loans for borrowers with 10 or fewer employees, or for loans under $ 250,000 to borrowers in low- and moderate-income neighborhoods.
Application dates for a PPP Round 3 loan
As noted above, applications for the third round of draws PPP loans from approved community financial institutions began on Mon Jan 11, 2021. Entries for the second draw began on Wednesday January 13, followed by first and second draw loans from small lenders with less than $ 1 billion in assets on Fri 15 Jan 2021. All SBA 7 (a) lenders have been approved to accept first and second drawdown requests from Tuesday, January 19, 2021.
Beware of crooks. Much like the first two rounds, if you are a small business owner you can expect to hear scammers promising to help you get a P3 loan. Only go through approved lenders or the SBA.
PPP application deadline for the third round
The Consolidated Appropriations Act, 2021 (CAA) extended the Paycheck Protection Program (PPP) through March 31, 2021. However, PPP funds have run out, which means that the PPP program is no longer available as of May 31, 2021.
The amount of funds made available in the third round was $ 284 billion. Loans of up to $ 10 million were available for first draw borrowers, and loans of up to $ 2 million were made available to second draw small business owners.
On March 30, 2021, President Biden signed the Paycheck Protection Program Extension Act, which gave applicants until May 31, 2021 to apply for a PPP loan, extended the period covered until June 30, 2021, and gave lenders until ‘on this date to process loans.
Series 3 PPP Loan Application Process
New first and second draw loans followed a similar pattern to previous PPP loans. Business owners could download and complete the loan application from the SBA website. The first run request was five pages, including instructions, and the second run request was six pages, including instructions.
Period covered for round 3 PPP
The Series 1 and 2 PPP loans stipulated that the period during which you were to use your loan proceeds (covered period) would be an eight week period starting on the date you received your loan proceeds. This was then extended to 24 weeks.
Round 3 allowed you to choose any duration period between eight weeks and 24 weeks, giving you more control over how to handle downsizing, if necessary, after P3 funds are depleted.
Use of Series 3 PPP funds
CAA has expanded the types of expenses you can use Round 3 PPP funds for. This also applies to existing PPP loan funds (unless you’ve already gotten a rebate). In addition to payroll, rent, covered mortgage interest and utilities, the Paycheck Protection Program will now allow you to use the loan proceeds to:
The percentage of first and second draw PPP loans that are to be used for payroll expenses.
- Certain operating expenses including Business software; cloud computing services relating to business; delivery of products or services; payroll processing, payment and follow-up fees; HR and invoicing functions; tracking supplies, inventory, records and expenses
- Costs of damage to covered property, including costs related to damage or vandalism caused by looting or public disturbance in 2020 that were not covered by insurance or other compensation
- Listed supplier costs including payments to a supplier of goods essential to operations and made under a contract or order in force at any time before the period covered or, in the case of perishable goods, in force at any time during the period covered
- Covered worker protection costs including any operating or capital expenditures necessary to comply with any requirements or guidelines issued by CDC, HHS, OSHA or any state or local government during the period beginning March 1, 2020 and ending on the expiry date of the national emergency
Tax treatment of Series 3 PPP loans
Round 3 PPP loans will not be included in your business taxable income. If your loan is canceled, the expenses paid with the proceeds of your loan will be tax deductible. In addition, this rule applies to new, existing and previous PPP loans. Additionally, any increase in the income tax base resulting from your PPP loan will remain even if the PPP loan is ultimately canceled.??