The U.S. Small Business Administration (SBA) and the Treasury Department released guidance Wednesday evening for the Restructured Payroll Check Protection Program (PPP).
The directive included two temporary final rules (IFRs).
- The 82 IFR page “Temporary Changes to the Business Loan Program; Revised Paycheck Protection Program” integrates the PPP exempt loan rules for first-time borrowers and defines changes made by the Small Business, Nonprofit, and Utilities Economic Assistance Act, PL 116-260.
- The 42 IFR page “Temporary Changes to the Business Loan Program; Second Salary Protection Drawdown Loans Program” establishes guidelines for PPP loans for companies that have previously obtained a PPP loan.
Additionally, SBA has released a file Three pages “Guidance on Access to Capital for Business Concerns of Minorities, Disadvantaged, Veterans, and Women.” This directive includes a commitment from SBA to make the PPP application window exclusively open for at least the first two days of applications from community financial institutions serving minority-owned businesses and women. The SBA did not set a date for the PPP restart, but the program was approved until March 31.
Erik Asgeirsson, CEO of AICPA affiliate CPA.com, said Wednesday afternoon at AICPA Town Hall that new PPP forms are expected to be released this week and that SBA could begin taking orders as early as Monday.
Congress has revived the public-private partnership as part of the $ 900 billion COVID-19 Relief Bill Which were signed into law on December 27. Original PPP rendered $ 525 billion cancellable loans More than five months before it stops accepting applications in August. The Economic Aid Act restarted PPP with many of the same parameters as the first program but also many important differences from the original PPP. The new PPP is mandated to operate until March 31. New PPP request forms have not yet been released but it is expected that will take place in the next few days. SBA has yet to announce when to start accepting new PPP applications.
Public-private partnership loans for the second draw
One of the biggest changes to the new public-private partnership is that Congress has made funding available to companies that previously took out a PPP loan. Borrowers are eligible for a second draw PPP loan of up to $ 2 million, provided they have:
- 300 employees or less.
- Use or will use the full amount of the first PPP loan on or before the expected date of the second PPP loan to be disbursed to the borrower. The IFR also clarifies that the borrower must have spent the full amount of the PPP loan on eligible expenditures.
- It saw revenue drop 25% or more in all or part of 2020, compared to all or part of 2019. This is calculated by comparing total receipts in any quarter of 2020 with the quarter applied in 2019, or in provision added in the IFR, a borrower who has been operating in all four quarters of 2019 can provide copies of annual tax forms that show a decrease in Annual receipts of 25% or more in 2020 compared to 2019.
The Economic Assistance Act did not provide a general definition of gross revenue to determine a borrower’s revenue reduction, so the new directive makes the definition consistent with the definition of receipts in 13 CFR Section 121.104 of the SBA Volume Regulations. Specifically, the IFR defines total receipts to include all revenue in any form received or due (according to the entity’s accounting method) from any source, including sales of products, services, benefits, dividends, rents, royalties, fees or commissions, Discounted through royalties and allowances. PPP loans flush with the first draw are not included in the total receipts for 2020.
Public-private partnership loans for the first draw
The Economic Aid Law provides PPP loans for first draw-down borrowers that were effective on February 15, 2020, and come from one of the following groups:
- Firms with 500 employees or less are eligible for other 7 (a) SBA loans.
- Sole Proprietors, Independent Contractors and Eligible Self Employed Individuals.
- Not-for-profit, including churches.
- Accommodation and catering services operations (those with North American Industry Classification System (NAICS) codes starting with 72) with fewer than 500 employees per physical location.
- a second. 501 (c) (6) Business associations, such as chambers of commerce, visitor offices, etc., and “destination marketing organizations” with 300 employees or fewer and receive no more than 15% of receipts from lobbyists. Pressure activities must not include more than 15% of the organization’s total activities and cost no more than $ 1 million during the last tax year that ended before February 15, 2020. Sports leagues are not eligible.
- Majority-owned or controlled news organizations with NAICS code 511110 or 5151 Business or public not-for-profit broadcasting entities having commerce or businesses under NAICS code 511110 or 5151. The maximum size of this category is no more than 500 employees per site.
In a change from the original public-private partnership, publicly traded corporations and corporations that are controlled, directly or indirectly, by the President, Vice President, Chief Executive Officer, and Members of Congress (or their spouses as defined in applicable common law) are not eligible for loans Partnership between the public and private sectors.
PPP applicants must provide sufficient documentation to demonstrate eligibility and proof of the eligible salary amount, which may include, as applicable, salary records; Payroll tax returns; Form 1099-MISC, Miscellaneous income; Form 1040, Schedule C, Profit or loss from business, Or the schedule and, Profit or loss from farming; Income and expenses from a sole proprietorship; Or bank records.
Maximum PPP loan amounts
In general, first-time borrowers through the PPP may receive a loan amount up to 2.5 times the average monthly salary costs (excluding employees who earn more than $ 100,000 per year) in the preceding loan or calendar year. PPP borrower with NAICS codes beginning with 72 (hotels and restaurants) can receive up to 3.5 times the average monthly payroll costs.
The maximum limit for the PPP loan for the first draw is $ 10 million, as was the case in the original public-private partnership. Applicants must submit Form 941, Federal employer tax return, (Or other forms containing similar information) and unemployment insurance tax reporting forms for state quarterly wages from each quarter in 2019 or 2020 (whichever is used to calculate the loan amount), or equivalent payroll processors’ records, along with evidence of any Retirement and health insurance contributions.
Public-private partnership borrowers can exempt first and second drawdown loans if funds are used for eligible costs. As with the first round of PPP, eligible costs for loan forgiveness in the revised partnership include payroll, rent, covered mortgage interest and utilities. Additionally, the following costs are now eligible:
- Coverage for worker protection and facility modification expenses, including personal protective equipment, to comply with federal health and safety guidelines for COVID-19.
- Covered property damage costs related to property damage and vandalism or looting due to public unrest in 2020 which are not covered by insurance or any other compensation.
- Expenses to suppliers that are necessary at the time of purchase for the recipient’s current operations.
- Covered operating expenses, which refer to payments for any business program or cloud computing service that facilitates business operations; Delivery of the product or service; Process, pay or track salary expenditures; HR; Sales and billing functions; Or accounting or track supplies, inventory, records, and expenses.
To be eligible for full loan forgiveness, borrowers through the PPP will have to spend at least 60% of the funds on their payroll over a covered period of eight or 24 weeks.
Borrowers who take out a PPP loan of $ 150,000 or less will get an exemption if the borrower signs a certificate of no more than one page in length and presents it to the lender, which includes a description of the number of employees the borrower was able to retain because of the loan and the estimated total amount of the loan that was spent on Salary costs and total loan amount. SBA still has to create the simplified application form but it should do so by Jan.20. The form may not require additional materials unless it is necessary to demonstrate loss of revenue requirements or to meet relevant legal or regulatory requirements. Borrowers are required to keep employment-related records for four years and other records for three years, as the Small Business Administration may review these loans to verify that there is no fraud.
Minority companies, disadvantaged, veteran, and women-owned
The Economic Aid Act provides provisions for new and smaller borrowers, borrowers in low- and middle-income communities, and community and smaller lenders. Aspects laid out include the following:
- $ 15 billion in PPP loans for first and second drawdowns for community financial institutions lending;
- $ 15 billion in PPP loans with first and second withdrawals of lending by insured depository institutions, credit unions, and agricultural credit system institutions with combined assets of less than $ 10 billion;
- $ 35 billion for new borrowers from the PPP in the first draw; And the
- $ 15 billion and $ 25 billion for PPP loans with first and second draws, respectively, for borrowers with a maximum of 10 employees or loans of less than $ 250,000 for borrowers in low- or middle-income neighborhoods. The Small Business Administration decided that at least 25% of each of these earmarked amounts would go to each group: loans to borrowers with a maximum of 10 employees and loans of less than $ 250,000 to borrowers in low or middle-income neighborhoods. .
The Small Business Administration announced in its three-page guidelines that it will take a number of steps to ensure greater access to public-private partnerships for minorities, underserved, veteran, and women-owned business interests. In particular, the Small Business Agency said it will only accept PPP loan applications from community financial institutions for at least the first two days when the PPP portal reopens. Additionally, the SBA said it will:
- Direct Lender Borrower inquiries to small lenders who can help traditionally disadvantaged communities;
- Small Business Lender Match with Certified Development Corporation (CDCs), Farm Credit System Lenders, Microcredit Brokers, and Smaller Traditional Lenders;
- Continue to set aside hours dedicated to processing and assisting the smallest PPP lenders with PPP loans;
- Continue to actively encourage community development financial institutions and minority-owned lenders, women, veterans, and military personnel to apply to become lenders through public-private partnerships. SBA said it will give full and immediate attention to these applications to become a lender in accordance with program guidelines, including in cases where the lender does not meet all of the requirements listed in the updated SBA Form 3507;
- Continue to work with the Federal Reserve System of Governors on PPP liquidity facilitation to enable PPP lenders, including non-bank lenders, to pledge PPP loans to the Federal Reserve as collateral for Federal Reserve loans to enhance lenders’ liquidity Enabling PPP lenders to expand their lending capacity;
- Promote awareness of these policies and procedures through traditional media, SBA social media accounts, and guidance to lenders prior to the official launch of SBA loan systems;
- Continue to work with federal partners. Including the Department of Agriculture, the Federal Reserve, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Agricultural Credit Administration, and the National Credit Union Administration, to share guidance with PPP lenders, borrowers, and the wider. General.
AICPA experts discuss the latest public-private partnership programs and other small business assistance programs during a bimonthly virtual town hall. The webcast, which provides CPE credit, is free to AICPA members. go to AICPA Town Hall Series For more information and to register.
The The AICPA Paycheck Protection Program Resource page It houses the resources and tools AICPA produces to help address the economic impact of the Coronavirus.
For more news and reports on Coronavirus and how professional experts can deal with the challenges related to the pandemic, visit Jova‘s Coronavirus Resources Page or Subscribe to our email alerts To break PPP news.
– Jeff Drew (Jeff.Drew@aicpa-cima.com) he is Jova Senior Editor.