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US government taking applications for second round of PPP loans

This year, PPP loans will start today with applications only to community lenders, as opposed to larger interstate banks, which applicants can apply to after the first two rounds. (Photo: istock)

January 11, 2021

Although as of Monday the U.S. government started taking applications from restaurant and other businesses owners for the latest round Paycheck Protection Program loans, they must apply though community financial institutions, according to a news release from the U.S. Small Business Administration.

That means business owners may only submit applications for Monday's draw, as well as the second draw set for Wednesday, to community lenders financial institutions (allotted $15 billion) and credit unions, Farm Credit System lenders and similar smaller-funded institutions (allotted $15 billion).

Businesses with 300 or fewer employees can participate but are capped at $2 million and must prove that their business dropped at least 25% from a single 2019 quarter, compared with the corresponding quarter in 2020.

"Today's guidance builds on the success of the program and adapts to the changing needs of small business owners by providing targeted relief and a simpler forgiveness process to ensure their path to recovery," Jovita Carranza, SBA administrator, said in the press release.

After the second draw, larger banks can participate in the program as lenders, unlike the guidelines for the PPP loans last spring, which many said advantaged bigger lenders with more cash. These PPP rounds authorize up to $284 billion for job retention and certain other expenses through March 31, 2021, and allow certain existing PPP borrowers to apply for a "second draw" PPP loan.

The PPP program has provided 5.2 million loans worth $525 billion to small businesses, supporting more than 51 million jobs, said Treasury Secretary Steven T. Mnuchin.

Other PPP updates under the Economic Aid to Hard-Hit Small Businesses, Non-Profits and Venues Act, include:

• Borrowers can set their PPP loan's covered period to be any length between eight and 24 weeks.
• Loans will cover additional expenses, including operations expenditures, property damage costs, supplier costs and worker protection expenditures.
• The program's eligibility is expanded to include 501(c)(6)s, housing cooperatives, destination marketing organizations and other types of organizations.
• Greater flexibility for seasonal employees.
• Certain existing borrowers can request to modify their "first draw" PPP loan amount.
• Certain existing borrowers are now eligible to apply for a "second draw" PPP loan.

A borrower is generally eligible for a "second draw" PPP loan if they meet the following qualifications:

• Previously received a "first draw" PPP loan and will or have used the full amount only for authorized uses.
• Have no more than 300 employees.
• Can demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020.

Further guidance under the new program is available at the SBA website.