It’s nothing short of miraculous this holiday season that our elected officials (finally) approved a second draw of PPP (Paycheck Protection Program) loans Monday night, among many other provisions in the latest recovery bill, the “Emergency Coronavirus Relief Act of 2020.” It’s the longest-ever bill in the history of our republic (at nearly 5,600 pages), and despite being very involved with Small Business Committee staff and others on Capitol Hill, it took me a bit to find the small business section and to process what it all means for you. Of course, it wouldn’t quite be 2020 without more drama and uncertainty (silly for us to actually think things might have gone smoothly for once this year). So, now we wait to see if the President will accept the passed bill as-is or will try to force truly last-minute changes to it.
While the bill overwhelmingly passed both chambers of Congress, it must now go to the President for signature after the current seven-day Continuing Resolution (CR) expires on Monday, December 28th. However, the legislation also requires the agencies to establish regulations for the entire small business title (section) within ten (calendar) days of enactment. This means that in the “best-case” scenario, especially when we consider the holidays in the middle of this time period, SBA and the lending community won’t be able to launch second draw PPP loans (and restart first draw PPP loans — also in the legislation with up to $35B available) until Friday, January 8th.
My team and I have heard from a LOT of people about this, but “No, we can’t wire you your second draw PPP loan yet, just because you read on social media that it passed.” That’s not quite how these things work, unfortunately. Now, obviously things can change in DC (a near certainty in this manic year), so who really knows what’s next?
What I DO know about this legislation is that the small business sections aren’t the “controversial” parts, and it maintains wide bipartisan support in Congress and the White House. And I certainly don’t have to remind you that many small business owners are desperate for these funds to continue operating and planning for a better 2021.
I’ve spent the past few days (and weeks before this on earlier versions) dissecting what this bill will mean to our small business community. Here is what we know so far:
- Small businesses with 300 or fewer employees that have sustained a 25 percent (or more) revenue loss in any quarter of 2020 are eligible to apply for a second draw PPP loan. $284.45B is available for this.
- The maximum second draw PPP loan will be $2MM or 2.5x average monthly payroll like with the initial, first draw PPP loans (or 3.5x if a business is in NAICS Code 72).
- For second draw PPP loan applicants seeking up to $150k, there will be a simple certification process attesting to the qualifying, quarterly revenue reductions, thus expediting these submissions.
- It provides full tax deductibility of business expenses on forgiven PPP loans (on both first and second draw loans).
- It expands forgivable expenses (beyond the original eligibility) to include supplier costs (such as accounting and IT expenses) and investments in software, facility modifications, and personal protective equipment.
- The loan forgiveness process for first draw and second draw PPP loans less than $150K will be simplified to a one-page certification (business owners will need only to provide the number of employees retained, amount spent on payroll, and total loan amount).
- It repeals the CARES Act provision requiring borrowers to deduct the EIDL (Economic Injury Disaster Loans) advance from their PPP loan forgiveness amount.
- It provides $20B more for EIDL.
- It provides $75B for SBA 7(a) loans (often made for working capital, business acquisition, business debt refinance (and other) purposes) with fees waived through the end of this fiscal year (on 504 loans as well).
- It extends the Section 1112 payments of the CARES Act for three months for most businesses (up to $9K/month); for the hardest hit businesses (those belonging to the 2- and 3-digit NAICS categories with the most severe job losses) for eight months; and for six months for new SBA 7(a) or 504 loans made between February 1st, 2021 and the end of this fiscal year. This is to begin in February.
The above represents somewhat of a Christmas “wishlist” for many in the small business community, and while no legislation is ever perfect, I hope you’ll join me in wishing for the swift enactment of it into law to help so many in these trying times.
The spirit of the season is one of love and hope, of care and concern. We, at Fountainhead, wish all of these for you and yours this blessed holiday season and always.
