(iii) If a borrower meeting the criteria in subsection (6)(i) of this section has employees, the maximum loan amount is calculated as the lesser of: (1) The sum of (i) the difference between gross income and employee payroll costs of the borrower in 2019 or 2020 (at the election of the borrower), as reported on a Schedule F (IRS Form 1040), that is not more than $100,000, divided by 12, and (ii) the average total monthly payment for employee payroll costs incurred or paid by the borrower during the same year elected by the borrower; by. Gross receipts do not include the following: Taxes collected for and remitted to a taxing authority if included in gross or total income (such as sales or other taxes collected from customers and excluding taxes levied on the concern or its employees); proceeds from transactions between a concern and its domestic or foreign affiliates; and amounts collected for another by a travel agent, real estate agent, advertising agent, conference management service provider, freight forwarder or customs broker. Congress designated $137 billion for PPP second draw loans as part of a larger funding and relief package. SBA may provide further guidance, if needed, through SBA notices and a program guide which will be posted on SBA's website at www.sba.gov. However, if a borrower sold a segregable division during 2020, the gross receipts will continue to include the receipts of the division that was sold. Second Draw PPP Loans are generally subject to the same terms, conditions and requirements as First Draw PPP Loans. Certain 2020 first draw PPP loans were flagged with hold codes after SBA review. (C) The Applicant is not a business concern or entity (a) for which an entity created in or organized under the laws of the People's Republic of China or the Special Administrative Region of Hong Kong, or that has significant operations in the People's Republic of China or the Special Administrative Region of Hong Kong, owns or holds, directly or indirectly, not less than 20 percent of the economic interest of the business concern or entity, including as equity shares or a capital or profit interest in a limited liability company or partnership; or (b) that retains, as a member of the board of directors of the business concern, a person who is a resident of the People's Republic of China. This aggregation applies for the entire period of measurement, not just the period after the affiliation arose. SBA has drafted this rule, to the extent practicable, in accordance with the standards set forth in section 3(a) and 3(b)(2) of Executive Order 12988, to minimize litigation, eliminate ambiguity, and reduce burden. that is not more than $100,000, divided by 12; (2) the average total monthly payment for employee payroll costs incurred or paid by the borrower during the same year elected by the borrower; by, (B) 2.5 (or, only for a borrower assigned a NAICS code beginning with 72 as defined in subsection (f)(10) at the time of disbursal, 3.5); or. 14. The Administrator has concluded that a limitation of $4,000,000 is appropriate because it is proportional to the $20,000,000 maximum amount for corporate groups that is provided under the Consolidated First Draw PPP IFR when the maximum loan amount for a single PPP loan is $10,000,000. The President of the United States manages the operations of the Executive branch of Government through Executive orders. The intent of the Economic Aid Act is that SBA provide relief to America's small businesses expeditiously. (9) Businesses that are part of a single corporate group shall in no event receive more than $4,000,000 of Second Draw PPP Loans in the aggregate. (E) The Applicant is not a business concern or entity primarily engaged in political or lobbying activities, including any entity that is organized for research or for engaging in advocacy in areas such as public policy or political strategy or otherwise describes itself as a think tank in any public documents. This method will be particularly important for small borrowers that may not have quarterly revenue information readily available. Second Draw PPP Loans generally are guaranteed by SBA under the same terms, conditions, and processes as First Draw PPP Loans. Paragraph 7(a)(37)(O) of the Small Business Act provides that a Second Draw PPP Loan may be made only to a borrower that received a First Draw PPP Loan under paragraph 7(a)(36). In addition, the SBA has addressed some issues in their guidance. The second draw loan program, which closes March 31, 2021, contains stricter eligibility requirements and a lower loan limit, but it retains many of the original terms and conditions of the PPP program. the current document as it appeared on Public Inspection on This new section authorizes the U.S. Small Business Administration (SBA or the Administration) to guarantee Paycheck Protection Program Second Draw Loans (PPP Second Draw Program), under generally the same terms and conditions available under the Paycheck Protection Program (PPP) established under section 7(a)(36) of the Small Business Act (15 U.S.C. Call Center Representative at 833-572-0502, or the local SBA Field Office; the list of offices can be found at https://www.sba.gov/tools/local-assistance/districtoffices. 601(3)-(6). For second draw loans, the bill appears to exclude from eligibility borrowers that previously qualified as a "small business concern" under the "alternative size standard" or the borrower's. These include, but are not limited to the following terms: Subsection (b) of this IFR confirms that these terms apply to Second Draw PPP Loans. Pursuant to section 808(2) of the CRA, SBA finds, for good cause, that a 60-day delay in the effective date is unnecessary and contrary to the public interest. Accordingly, a single business entity that is assigned a NAICS code beginning with 72 is eligible to receive a Second Draw PPP Loan if it employs no more than 300 employees per physical location and meets the revenue reduction requirements and otherwise satisfies the eligibility criteria described in this IFR. Economic Aid Act Provides Second Draw PPP Loans, Jan. 15, 2021 SBA to Require PPP Borrowers of $2 Million-Plus to Complete Loan Necessity Questionnaires, November 24, 2020 SBA Issues Much-Anticipated Guidance Regarding Changes of Ownership in PPP Loans, October 8, 2020 A representative of the applicant can certify for the business as a whole if the representative is legally authorized to do so. A business concern or entity primarily engaged in political activities or lobbying activities, including any entity that is organized for research or for engaging in advocacy in areas such as public policy or political strategy or that describes itself as a think tank in any public documents; certain entities organized under the laws of the People's Republic of China or the Special Administrative Region of Hong Kong, or with other specified ties to the People's Republic of China or the Special Administrative Region of Hong Kong; any person required to submit a registration statement under section 2 of the Foreign Agents Registration Act of 1938 (. Since most borrowers will use 2019 or 2020 the rule text refers only to 2019 or 2020 for simplicity and readability. Undersecretary of Works in Bahrain with primary focus on major infrastructure ,PPP/ affordable housing . Owner of The Law Office of Ren P. Moniz 2y (i) for a Second Draw PPP Loan of up to (and including) $50,000, in an amount equal to the lesser of: (A) 50 percent of the balance of the financing outstanding at the time of disbursement of the loan; or. better and aid in comparing the online edition to the print edition. the official SGML-based PDF version on govinfo.gov, those relying on it for (1) The applicant must submit to the lender SBA Form 2483-SD (Paycheck Protection Program Second Draw Borrower Application Form) or the lender's equivalent form including the required certifications and the documentation in subsection (g)(2). Global challenges and issues, such as armed conflicts, terrorism, inequality and injustice, migration, religious and cultural . An updated PPP application form has been issued by the SBA, together with an application for the new Second Draw Loan program. Ch. documents in the last year, 1489 6. (3) Any business concern that has more than one physical location and that employs not more than 300 employees per physical location is eligible to receive a Second Draw PPP Loan if it is assigned a NAICS code beginning with 72 at the time of loan disbursement and otherwise meets the eligibility criteria in subsection (c)(1). Two distinct Paycheck Protection Programs (PPP) opened on January 19, 2021. Payroll costs has the same meaning as in subsections (B)(4)(g) and (B)(4)(h) of the Consolidated First Draw PPP IFR and is calculated in the same manner. The key differences between First Draw PPP Loans and Second Draw PPP Loans are described in this IFR, which explains the loan terms, eligibility requirements, and application process for Second Draw PPP Loans. (ii) If a borrower meeting the criteria in subsection (6)(i) of this section does not have any employees, the maximum loan amount is the product obtained by multiplying: (A) The gross income of the borrower in 2019 or 2020, as reported on a Schedule F (IRS Form 1040), that is not more than $100,000, divided by 12; and. This exclusion of gross receipts of such former affiliate applies during the entire period of measurement, rather than only for the period after which affiliation ceased. Uses of your new Second Draw PPP Loan: The SBA has expanded the uses for a Second Draw PPP Loan, beyond the simple payment of your monthly "owner profit." However, at least 60% of the new Second Draw PPP Loan must be used to pay your owner profit each month and cannot be more than $8,333/month or $100,000/year. Second Draw PPP Loans generally are guaranteed by SBA under the same terms, conditions, and processes as First Draw PPP Loans. The requirements applicable to PPP lenders are in sections (C) and (D) of the Consolidated First Draw PPP IFR. Given the short duration of this program, and the urgent need to issue loans quickly, the Administrator in consultation with the Secretary has determined that it is impractical and not in the public interest to provide a delayed effective date. The agency must, however, publish the certification in the Federal Register at the time of publication of the rule, along with a statement providing the factual basis for such certification. If the agency head has not waived the requirements for a regulatory flexibility analysis in accordance with the RFA's waiver provision, and no other RFA exception applies, the agency must prepare the regulatory flexibility analysis and publish it in the Federal Register at the time of promulgation or, if the rule is promulgated in response to an emergency that makes timely compliance impracticable, within 180 days of publication of the final rule. (2) What do lenders have to do in terms of loan underwriting? 2. If the lender identifies errors in the borrower's calculation or a material lack of substantiation in the borrower's supporting documents, the lender should work with the borrower to remedy the issue. To be eligible for a Second Draw PPP Loan, a borrower must certify on SBA Form 2483-SD that, before the Second Draw PPP Loan is disbursed, the borrower will have used the full loan amount (including any increase) of its First Draw PPP Loan "only for eligible expenses." First-time borrowers (including newly eligible borrowers) can once again apply under the first-round program. (iv) The interest rate will be 100 basis points or one percent, calculated on a non-compounding, non-adjustable basis. No collateral will be required. implementing updates to the PPP. Open for Comment, Economic Sanctions & Foreign Assets Control, Tool Chests and Cabinets From China and Vietnam, Experimental Permits for Reusable Suborbital Rockets, Animal and Plant Health Inspection Service, Medicaid and Children's Health Insurance Program, Prohibition on Use by the United States Government of Commercial Spyware That Poses Risks to National Security, II. The Economic Aid Act authorizes the U.S. Small Business Administration to guarantee additional loans under the temporary Paycheck Protection Program, which was originally established under the Coronavirus Aid, Relief, and Economic Security Act to provide economic relief to small businesses nationwide adversely impacted under the Coronavirus Disease 2019 (COVID-19) Emergency Declaration (COVID-19 Emergency Declaration) issued by President Trump on March 13, 2020. SBA's FAQs on Loan Forgiveness 29. 31. It appears to limit second draw loans to businesses that have no more than 300 employees. 603, 604. For those careful and cautious borrowers grappling with the meaning of the necessity certification in the context of PPP2 loans, this guidance provides welcomed clarity. In addition, for a Second Draw PPP Loan greater than $150,000, the lender must confirm the dollar amount and percentage of the borrower's revenue reduction by performing a good faith review, in a reasonable time, of the borrower's calculations and supporting documents concerning the borrower's revenue reduction. Federal Register issue. 4. Further, although military procurers . 808(2). documents in the last year, by the Centers for Medicare & Medicaid Services (4) if the applicant was not in business during 2019, but was in operation on February 15, 2020, the applicant had gross receipts during the second, third, or fourth quarter of 2020 that demonstrate at least a 25 percent reduction from the gross receipts of the entity during the first quarter of 2020 (for example, an applicant that had gross receipts of $50,000 in the first quarter of 2020 and had gross receipts of $30,000 in the fourth quarter of 2020demonstrating a reduction of 40 percent from the applicant's gross receipts during the first quarter in 2020). (iv) The amount of any forgiven First Draw PPP Loan shall not be included toward any borrower's gross receipts. [27] Like First Draw PPP Loans, Second Draw PPP Loans are intended to provide expeditious relief to America's small Start Printed Page 3713businesses. informational resource until the Administrative Committee of the Federal Since this rule is exempt from notice and comment, SBA is not required to conduct a regulatory flexibility analysis. The $284 billion includes funding for businesses that already received a PPP loan under the Coronavirus Aid, Relief and Economic Security (CARES) Act (referred to as "second draw loans") and . The Small Business Administration ("SBA") and the Department of the Treasury have begun releasing guidance for the reopened Paycheck Protection Program ("PPP") for "First Draw" PPP loans and for the new "Second Draw" PPP loans, both provided for under the recently enacted COVID 19 relief package (the "Act").This alert summarizes the SBA's top-line overview of the First and . (ii) Each lender's underwriting obligation under the Second Draw PPP is limited to the items above and reviewing the Paycheck Protection Program Second Draw Borrower Application Form (SBA Form 2483-SD) or lender's equivalent form. Under section 7(a)(37) of the Small Business Act (15 U.S.C. Register documents. 12. If you are applying for a second draw PPP loan, you need to make sure each number and name matches the first draw loan application exactly. The rules applicable to Second Draw PPP Loans are published in section IV of this IFR. The deadline of May 31, 2021 is the same for both applications. Moreover, this definition will enhance the administrability of Second Draw PPP Loans because it is a definition already used by the Administration and many small businesses. (C) a warrant or right, other than a right to convert, to purchase, sell, or subscribe to a share or interest described in (A) or (B), respectively; (iii) Executive department has the meaning given the term in section 101 of title 5, United States Code; (iv) Member of Congress means a Member of the Senate or House of Representatives, a Delegate to the House of Representatives, and the Resident Commissioner from Puerto Rico; and. daily Federal Register on FederalRegister.gov will remain an unofficial More information and documentation can be found in our (ii) for a Second Draw PPP Loan of more than $50,000, in an amount that is: (A) 5 percent of the balance of the financing outstanding at the time of disbursement of the loan for a loan up to (and including) $350,000; and. This is because the SBA is prioritizing the disbursement of second draw loans. 2021-00452 Filed 1-12-21; 4:15 pm], updated on 4:15 PM on Monday, April 17, 2023, updated on 8:45 AM on Monday, April 17, 2023. 801 et seq.) Counts are subject to sampling, reprocessing and revision (up or down) throughout the day. Second Draw PPP Loans are generally subject to the same terms, conditions and requirements as First Draw PPP Loans. The Economic Aid Act also prohibits several additional categories of borrowers from receiving a Second Draw PPP Loan under section 7(a)(37) of the Small Business Act. (ii) Gross receipts of affiliates are calculated as follows: (A) Gross receipts of a borrower with affiliates is calculated by adding the gross receipts of the business concern with the gross receipts of each affiliate. 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