PPP to reopen Monday with key changes


Last updated on January 11th, 2021 at 02:22 pm

The Federal Paycheck Protection Program will return Monday with several changes that are expected to enhance its effectiveness and accessibility, senior Trump administration officials announced today.

The program will reopen for first-time borrowers initially, with second-time or “second-draw” borrowers eligible to apply Wednesday.

Community-based lenders, such as community-development financial institutions or financial institutions that serve low-income communities, will exclusively process loan applications for at least two days when the program reopens.

The PPP will open to all participating lenders shortly thereafter, but officials did not offer a specific timeframe.

Congress last month authorized $900 billion in new COVID-19 relief, including $284 billion for the PPP, which will be combined with the remaining $140 billion from the first round of aid.

Here are a few major changes to the program:

Stricter reporting guidelines

The first round of the program, launched at the onset of the pandemic, operated under the honor code, asking applicants to testify that COVID-19 would substantially impact their business. Going forward, businesses must be able to demonstrate that at least a 25% drop in revenue occurred over an entire quarter last year.

Tax changes

The new stimulus bill includes changes in the tax law so that PPP loans will no longer count as income for the purposes of tax filing. Money that businesses spend using PPP funds is tax deductible.

Streamlined loan forgiveness

Those who borrowed $150,000 or less through the PPP will no longer be required to provide as detailed of an account of how funds were spent. Instead, these businesses will have their debt forgiven by filling out a one-page form, attesting that funds were used in accordance with PPP guidelines.

Second Draw PPP loan

Eligible businesses who received funding during the first round of PPP can apply for a second loan so long as they have or will use first round of funding funds for authorized uses, have 300 or less employees and can prove an at least 25% reduction in gross receipts between comparable quarters in 2019 and 2020.

Loan size cap

The new program also has a loan size cap of $2 million; PPP loans were previously capped at $10 million. Publicly traded businesses or those backed by private equity also have new rules preventing them from accessing loans.

Lending flexibility

PPP borrowers can set their PPP loan’s covered period to be any length between 8 and 24 weeks. The new loans will cover additional expenses, including operations expenditures, property damage costs, supplier costs and worker protection expenditures. Certain existing PPP borrowers can also request to modify their First Draw PPP loan amount.

The program’s eligibility is expanded to include 501(c)(6)s, housing cooperatives, destination marketing organizations and more.

Once the program is rolled out, small businesses will have until March 31 to access new funds.

Click here for additional information on the latest PPP guidance.

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