Sean Bryan Authors Article on Second-Draw PPP Loans and Details

Sean Bryan's column—entitled "New Rules for New PPP Loans"—addresses new Interim Final Rules (IFR) and guidance issued by the U.S. Small Business Administration (SBA) and Treasury.

The Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act (“Economic Aid Act”) enacted in late December as part of the Consolidated Appropriations Act, 2021 authorized the extension of the Paycheck Protection Program, both for new PPP loans and a second round of PPP loans to eligible borrowers, and appropriated an additional $284.45 billion (for a total of $806.45 billion) for this purpose.  Treasury and the Small Business Administration quickly issued two new Interim Final Rules, one that consolidated and restated 19 prior Interim Final Rules on PPP loans as well as establishing rules for the extension of the original PPP loan program through March 31, 2021, and one that established rules for the second round of PPP loans (“Second Draw Loans”).  On the same day, the SBA issued guidance on Accessing Capital for Minority, Underserved, Veteran and Woman-Owned Business Concerns.  The SBA is expected to begin accepting applications for new PPP loans on January 11, 2021, and for Second Draw Loans on January 13, 2021, and applications were posted on the Treasury website on January 8, 2021:

Guidance on Accessing Capital for Minority, Underserved, Veteran and Woman-Owned Business Concerns.  This short publication summarized the distribution of the first round of PPP loans – 27% of funds went to low- and moderate-income communities and 70% of PPP loans went to business with fewer than 10 employees.  To address potential barriers to access to capital, the Economic Aid Act specifically set aside funds for smaller borrowers and for community and smaller lenders.  The SBA determined to ensure increased access to PPP loans for minority, underserved, veteran and woman-owned businesses by:   
Guidance on PPP Loans.  The Economic Aid Act extended the authority to make PPP loans through March 31, 2021, which applies only to businesses that did not already obtain a PPP loan in 2020.  The Act also made some changes in the terms of PPP loans.  This Interim Final Rule consolidates all the prior rules in one document, but also makes necessary modifications based on legislation after the CARES Act was enacted.   

Changes include:
Second Draw PPP Loans.  The Economic Aid Act authorized a second round of PPP loans to a subset of prior PPP loan borrowers, also through March 31, 2021.  The terms applicable to initial PPP loans are generally applicable to Second Draw Loans, but there are some differences.

If a borrower has a 2020 PPP loan that is under review by the SBA or the SBA believes the borrower was ineligible for a PPP loan, then the lender will not receive a SBA loan number until the issue is resolved.  Lenders likely will not know this until after the Second Draw Loan is disbursed, and this status does not prevent a borrower from receiving a Second Draw Loan, but it may increase lender due diligence for Second Draw Loan applications.

Overview of First Draw PPP Loans:

Overview of Second Draw PPP Loans:

Guidance on Accessing Capital:

Interim Final Rule on PPP Loans:

Interim Final Rule on Second Draw PPP Loans: