In accordance with the 2020 Economic Aid Act, the Small Business Administration is making $284 billion available to new (First Draw) and certain existing (Second Draw) Paycheck Protection Program (PPP) borrowers. As a reminder, the loan application portal reopened yesterday, January 19, to all PPP lenders.
To date, the SBA has issued the following new PPP loan guidance.
Under the new PPP loan program:
- a Second Draw PPP loan applicant must enter its First Draw PPP loan number (eight digits/dash/two digits: xxxxxxxx-xx). If a First Draw PPP Loan is under SBA review and/or the borrower may have been ineligible for the loan amount it received, SBA will not issue a Second Draw PPP Loan number until the First Draw PPP Loan issues are resolved;
- maximum Second Draw PPP loan amounts are $2 million/loan and $4 million/corporation;
- borrowers can adopt covered periods of between eight and 24 weeks;
- in addition to previously allowed expenses, new loan proceeds may be used for certain operational, property damage, supplier and worker protection expenditures;
- potential PPP borrowers now include 501(c)(6) nonprofits; and
- certain First Draw PPP loan borrowers are eligible to modify their loan amounts.
A PPP borrower is generally eligible to apply for a Second Draw PPP loan if it:
- has received a First Draw PPP loan and fully uses the proceeds for authorized expenses only;
- has no more than 300 employees; and
- had at least a 25% reduction in gross receipts between comparable calendar quarters in 2019 and 2020.
Important: Dealerships applying for a new PPP loan must certify that the loan is “necessary to support ongoing business operations in light of current economic conditions.” This parallels the certification dealerships made when applying for PPP loans in 2020. But for many dealerships, current market conditions and economic circumstances are better than what they were when First Draw PPP loan applications were filed between April and August 2020.
Dealers interested in applying for a new PPP loan should consult legal counsel, accountants and prospective lenders.
