New Guidance for Paycheck Protection Program (PPP2)

Late Wednesday night (January 6), the Department of the Treasury and Small Business Administration (SBA) updated the Interim Final Rule (IFR) to provide the revised guidance for second draws on the Paycheck Protection Program (PPP2). While there may be some remaining “grey areas” as it relates to PPP2, the IFR explicitly states this PPP2 program will either follow the same rules as PPP1 or that such rules have changed and then states the new rule. Below, we have summarized both the changes and important points for purposes of applying for a PPP2 loan.


Eligibility Requirements


Timing


Today (January 8), the SBA announced when its PPP portal will open for the following borrowers:


January 11, 2021 – First-draw (PPP1) applicants processed through “community financial institutions” only (e.g. Community Development Financial Institutions, minority deposit institutions, certified development companies and microloan intermediaries)


January 13, 2021 – Second-draw (PPP2) applicants processed through “community financial institutions” only (e.g. Community Development Financial Institutions, minority deposit institutions, certified development companies and microloan intermediaries)


“Shortly Thereafter” – All other applicants processed through all participating lenders


General Requirements


An eligible borrower must:

  1. Have received a first-draw PPP loan, and

  2. Has used, or will use, the full amount of the PPP1 loan on or before the expected disbursement date of a PPP2 loan.

  • The borrower must have spent the full amount of its PPP1 loan on eligible forgivable expenses, including any PPP1 loan principal increases resulting from Economic Aid to Hard-Hit Small Businesses, Nonprofits and Ventures Act signed by President Trump on December 27, 2020.

  • We interpret this to mean that any borrowers who did not receive, or expect to not receive, full forgiveness on their PPP1 loan will be ineligible for a PPP2 loan.

Borrowers that have “permanently” closed are prohibited from obtaining a PPP2 loan. However, a borrower that has “temporarily” closed or suspended business remains eligible for a PPP2 loan.