Paycheck Protection Program

SBA and Treasury Issue Guidance for First Draw and Second Draw PPP Borrowers

With the recent re-opening of the Paycheck Protection Program (PPP) portals for all borrowers, the Small Business Administration (SBA), in conjunction with the U.S. Treasury Department, has been busy issuing guidance to borrowers covering a number of different topics.  Notably, the SBA issued the following (PPP) FAQs[1]:

On January 17, 2021, the SBA released this series of FAQs for First Draw PPP borrowers seeking guidance surrounding loan amount calculations (up to $10 million; $20 million aggregate for corporate groups).  Both for-profit and non-profit PPP borrowers can leverage this document as a reference point for computational steps by borrower type, as well as:

  • Documentation requirements;
  • Impact of Economic Injury Disaster Loans (EIDLs);
  • Payroll Cost compensation limitations (e., $100,000 per employee);
  • Treatment of employer group health, life, disability, vision and dental insurance contributions and retirement contributions; and
  • Treatment Employer state and local taxes assessed.

Borrowers should be reminded that owner limits for payroll costs, healthcare and retirement benefits continue to apply to both First Draw and Second Draw PPP loans.

Released on January 19, 2021, these FAQs center on the 25% revenue reduction eligibility requirements for for-profit and non-profit borrowers, as well as maximum loan amount computations, for Second Draw PPP borrowers (up to $2 million; $4 million aggregate for corporate groups).  Highlights of this set of FAQs include:

  • Gross receipt reference periods and definitions, including the exclusion of First Draw PPP and EIDL advances;
  • Considerations for affiliated groups and fiscal year filers; and
  • Substantiation and documentation requirements.

Additionally, this document provides similar computational steps by borrower type as found in the First Draw PPP FAQ referenced above, albeit adjusted for reduced maximum loan amounts.

Procedural Guidance

In addition to these FAQs, the SBA has recently issued the following Procedural Guidance:

  • Repeal of EIDL Advance Deduction Requirement: The SBA will no longer deduct EIDL advances from forgiveness payments remitted to lenders. Additionally, the SBA will remit reconciliation payments for those borrowers who had their loan forgiveness reduced prior to the issuance of this guidance.
  • First Draw PPP Loan Increases After Enactment of the Economic Aid Act: The following borrowers are provided with the steps required to augment previously received First Draw PPP loans (provided forgiveness has yet to be received):
    • Partnerships that excluded partner compensation;
    • Seasonal employers that can take advantage of any 12-week period between February 15, 2019 – February 15, 2020;
    • Farmers and Ranchers;
    • Eligible borrowers that fully repaid their First Draw PPP loan;
    • Borrowers that returned a part of their First Draw PPP loan; and
    • Borrowers that rejected the full amount of their First Draw PPP loans.
  • PPP Excess Loan Amount Errors: Borrowers and lenders are provided with the requisite steps when, despite good-faith efforts, borrowers received loans in excess of the amounts stipulated under the applicable rules and regulations.
  • PPP Borrower Resubmissions of Form 3508S Loan Forgiveness Applications, Lender Notice Responsibilities to PPP Borrowers, and Offset of Remittances to Lenders for Lender Debts: This procedural guidance details the following:
    • Confirmation that eligible borrowers may resubmit for loan forgiveness using Form 3508S, provided the SBA has not rendered its final loan forgiveness decision or has not remitted the PPP loan forgiveness payment;
    • Lender notification responsibilities to borrowers when loan forgiveness in full is denied;
    • SBA loan review decision steps, including borrower appeal rights;
    • Remittance of portions of the loan forgiveness amount by the SBA to the Lender; and
    • SBA/Lender offsets for delinquent debts.

Sax will continue to update you as further details are made available.  Reach out to your Sax advisor or email [email protected] with questions.  For more and on-going information relative to your state and business, visit Sax’s COVID-19 Resource Center.

[1] These FAQs do not carry the force and effect of law independent of the statutes and regulations on which they are based.

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