Community and Minority Owned Lending Institutions to Receive Early Prioritization

This morning, the Trump Administration announced that community and minority owned lending institutions may begin processing PPP loan applications this Monday, Jan. 11. The program will initially reopen for first-time borrowers, and for second-time (aka "second draw") borrowers application processing to begin on Jan. 13.  The SBA's updated loan application for the program, alongside additional guidance can now be accessed. Click here for a first time borrower application, and click here for a second draw loan application.

Earlier this week, the Treasury Department issued an overview of eligibility and rules (aka "interim final rules"). 

IAM has highlighted key qualifications below. 

First Time PPP Loan Borrower Requirements

• Business must have been in operation in February 2020, and have fewer than 500 employees.
• Sole proprietors, self-employed and independent contractors are eligible.
• Sec. 501(c)(6) organizations, (those with fewer than 300 employees) are also eligible, with some limitations on lobbying activity and spending.
• All first time borrowers should plan to review the interim final rules governing their loans, as issued by the Treasury Department.

"Second Draw" Loan Overview

Companies that participated in the first round of the PPP may be eligible to receive "second draw" loans, if they meet the following criteria:

• Have fewer than 300 employees.
• Have (or will use) the full amount of their first PPP loan on or before the expected date for the second PPP loan to be issued. Note - All money received from the PPP first loan must have been used on eligible expenses, in order to qualify for a second loan.
• Experienced a revenue reduction of 25% or more in all or part of 2020 compared with all or part of 2019, using a quarter to quarter comparison. Note - This is calculated by comparing gross receipts in any 2020 quarter with an applicable quarter in 2019, or an annual basis (2020 vs. 2019)
• Second-time borrowers should plan to review the interim final rules governing their loans, as issued by the Treasury Department.

Additional Information:

All PPP applicants must submit documentation sufficient to establish eligibility and to demonstrate the qualifying payroll amount - this may include payroll records, payroll tax filings and other tax forms. Your lender should be able to guide you through the process and required forms. First and second draw borrowers may receive a loan amount of up to 2.5 times their average monthly payroll costs, in the year prior to the loan or calendar year.

In addition to payroll, rent, covered mortgage interest and utilities, the following costs are also now eligible for PPP use:

• Covered worker protection and facility modification expenditures, including personal protective equipment, to comply with COVID-19 federal health and safety guidelines.
• Covered property damage costs related to property damage and vandalism or looting due to public disturbances in 2020 that were not covered by insurance or other compensation.
• Expenditures to suppliers that are essential at the time of purchase to the recipient’s current operations.
• Software used by the company to cover supply chain, HR and similar business and employee expenses.

To be eligible for full loan forgiveness, PPP borrowers will be required to spend at least 60% of the funds received on payroll over a covered period (between eight or 24 weeks). The application deadline for all PPP forgivable loans, as set by Congress, remains March 31st. 

As a reminder, IAM strongly encourages all member companies to work closely with their company's tax counsel (or similar), alongside your financial lending institution, for any additional rules that may be applicable to your loan and loan process. 

If you have any questions or would like to follow up, please contact Bryan Vickers with IAM's Regulatory Affairs team at bvickers@pacellp.com, 703-403-2882. IAM will keep members apprised of developments as they occur.