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(from multiple sources) The latest COVID relief bill, the Consolidated Appropriations Act, passed on Monday, December 21, outlined parameters for new borrowers of PPP loans and borrowers seeking to receive a second PPP loan (a “second draw” loan). The act appropriates $284.45 billion for both types of new PPP loans, with $35 billion explicitly set aside for first-time PPP borrowers.

Who is eligible? 

• New PPP borrowers
• Existing PPP borrowers that have exhausted the full amount of the loan on or before the second draw loan’s disbursement
• Organizations with fewer than 300 employees
• Organizations that can demonstrate that they have sustained a 25% or greater gross receipts loss in 2020 in relation to the comparable 2019 quarter.

What are the parameters of the new loans? 

• For independent schools, loans will be sized based on 2.5 times average monthly payroll, limited to a maximum amount of $2 million.
• To receive a loan, borrowers must certify that the uncertainty of current economic conditions makes the loan necessary and the funds will be used to retain workers and maintain payroll or mortgage, lease, and utility payments.
• Borrowers can now select their covered period. The covered period will be designated by the borrower and must be between 8 and 24 weeks in duration after the date of origination.

What are the terms for forgiveness?

• As with PPP1, PPP2 borrowers seeking 100% forgiveness must use 60% of the loan for payroll costs. The remainder of the loan may be used on expenses for payment of interest on covered mortgage obligations, rent obligations, utility payments, and this expanded list of expenses:
  • Covered operations expenditures: Payments for business software or cloud computing services that facilitated business operations, including, among other expenses:
    • delivery, processing, and payment for products and services
    • sales and billing
    • human resources
    • accounting services.
  • Covered property damage costs: Costs related to property damage due to public disturbances that occurred during 2020 that are not covered by insurance.
  • Covered supplier costs: Expenditures to a supplier pursuant to a contract, purchase order, or order for goods in effect prior to taking out the loan that are essential to the recipient’s operations at the time at which the expenditure was made. Contracts for perishable goods can be made before or during the life of the loan.
  • Covered worker protection expenditures: Personal protective equipment and adaptive investments to help a loan recipient comply with federal health and safety guidelines or any equivalent state and local guidance on COVID-19 restrictions. This may include costs to create or expand drive-through window facilities, ventilation or filtration systems, physical barriers (e.g., sneeze guards), or expansion of indoor, outdoor or combined business space, among other things.
  • Expanded definition of payroll costs: The definition of health care benefits eligible for forgiveness was clarified to include group life, disability, vision and dental insurance.
  • Important Note: The SBA has excluded borrowers who have received forgiveness from taking advantage of this expanded list of expenses. There is currently no guidance for borrowers (and their lenders) in the midst of the forgiveness process to retract and refile an application and loan decision packet that has been submitted to the SBA, but not yet approved by the SBA.
  • The forgiveness process for loans under $150,000 will be simplified. The SBA has been instructed to develop a one-page form that requires limited employee and payroll cost information and various borrower certifications. This new form could be similar in nature to the Form 3508S previously released by the SBA for use by borrowers with PPP loans of $50,000 or less.

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