PPP2 Benefits and Changes: What You Need to Know

The PPP2 Benefits include a new round of funding at $284 billion, lower from the original PPP’s $669 billion, with the maximum loan amount reduced to $2 million from $10 million. The PPP2 also allows businesses with less than 300 employees to apply, claiming employee retention tax credit, and expanding loan uses to cloud computing, software, and COVID-19 protection. Contrarily, political lobbying firms or companies with significant ties to China are not eligible. The PPP2 also provides extra help, including $15 billion to fund live venues, movie theaters, and cultural institutions. Additional benefits for eligible borrowers have been established under the Consolidated Appropriations Act of 2021, including the setup of another round of EIDL “first advances”. The PPP2 will expire on 3/31/21 and the new guidelines must be enacted within 10 days of signing (1/6/21). Businesses not in operation as of 2/15/2020 are not eligible for PPP funding.

Changes Between Original PPP and PPP2

Below is a table that highlights some of the changes between the original PPP offering and the one signed earlier this week. Keep in mind that Treasury and the SBA must still codify these changes, so the finished product may deviate from the legislative intent as outlined below:

Additional Information on PPP2

The recently signed Consolidated Appropriations Act of 2021 not only established another round of PPP funding (a/k/a PPP2), but also set up another round of EIDL “first advances”, as well as provided some additional benefits for eligible borrowers. These included the following:

• PPP2
  • The program will expire 3/31/21
  • The new guidelines must be enacted within 10 days of signing (1/6/21)
  • Borrowers will continue to choose the covered period of 8 or 24 weeks
  • Businesses not in operation as of 2/15/2020 are not eligible for PPP funding
  • Seasonal employers may calculate their maximum loan amount based on a 12-week period beginning 2/15/19 thru 2/15/2020
  • The amount of funding will continue to be based on 2.5X eligible expenses, except for businesses in NAICS code 72, which will be based on 3.5X eligible expenses
• PPP Forgiveness
  • The SBA is required to create a one-page simplified forgiveness form within 24 days of enactment (1/20/21)
  • Borrowers will be required to retain relevant records related to employment for 4 years and other records for 3 years after the loan is either forgiven or paid off
  • Expenses forgiven will be deductible from Federal Income Tax
• Other Lending-related Items of Interest
  • Borrowers with existing SBA loans will receive an additional 3 months of principal and interest payments starting in February 2021. Borrowers in underserved markets will receive the same payments for an additional 5 months (up to $9,000 per month)
  • SBA 7(a) loan guarantees will be increased to 90% thru the end of the 2021 fiscal year
  • SBA Express loans will again be increased to $1 million, thru the end of fiscal year 2021
  • The SBA may establish a 504 Express Loan Program, thru the end of fiscal year 2023
  • The covered period for EIDL “first advances” has been extended to 12/31/21, and the SBA will have up to 21 days to grant these funds
  • There are other set-asides and adjustments to be made to address loans to underserved markets and the SBA has 10 days (1/6/21) to develop a plan to address barriers to capital for these markets

Note: Treasury and SBA have a short timeline to generate a significant amount of guidance for borrowers and lenders alike. As a result, it is likely that the PPP2 program may not become available to applicants until mid-January. Please advise clients that we cannot provide them more specific guidance until these details have been worked-out. This is also true for clients that may be interested in seeking forgiveness of their existing PPP loans.

Question & Answer

What are the main differences between the original PPP and PPP2?

The main changes between the original PPP and PPP2 include a reduced total available funding, lower maximum loan amount, eligibility for businesses with less than 300 employees, expanded loan uses, and exclusions for political lobbying firms or companies with ties to China.

What additional benefits are provided under the Consolidated Appropriations Act of 2021 for eligible borrowers?

Under the Consolidated Appropriations Act of 2021, additional benefits for eligible borrowers include another round of EIDL “first advances”, the ability to claim the employee retention tax credit, and extra help in the form of $15 billion allocated to fund live venues, movie theaters, and cultural institutions.

When does the PPP2 program expire and what are the key guidelines businesses must follow?

The PPP2 program is set to expire on 3/31/21. Businesses must ensure that the new guidelines are enacted within 10 days of signing (1/6/21), choose a covered period of 8 or 24 weeks, and retain relevant records related to employment for 4 years and other records for 3 years after the loan is either forgiven or paid off.