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How the SBA’s new round of PPP loans works

By Adam Rombel


It started with community financial institutions

The U.S. Small Business Administration (SBA) and U.S. Treasury Department on Jan. 11 reopened the loan portal for the Paycheck Protection Program (PPP), the forgivable-loan initiative that seeks to help small companies survive the economic dislocations of the COVID-19 pandemic.

This round of the PPP authorizes up to $284 billion toward job retention and certain other expenses through March 31, 2021, the SBA says. The program is open to new borrowers and the government is trying to reach more underserved businesses, such as minority-owned companies. But the program is also open to businesses that already received PPP loans, as long they have 300 or fewer employees and meet other conditions.

The SBA portal initially granted PPP access exclusively to community financial institutions (CFIs) which include smaller and local banks, credit unions, community development financial institutions (CDFIs), minority depository institutions (MDIs), certified development companies (CDCs), and microloan intermediaries. It’s an effort to help underserved small businesses and address potential barriers to capital access, since CFIs typically work with underserved businesses. These lenders made up about 10 percent of all PPP participating lenders in the program in 2020, the SBA says. 

The first two days of the portal’s opening were designated for first-draw PPP loan applications, or those for borrowers that haven’t yet received a PPP loan before the program closed in August 2020.

On Jan. 13, participating CFIs were allowed to begin submitting application information to the SBA for second-draw PPP loans, which are for certain eligible borrowers that previously received a PPP loan, generally have 300 employees or fewer, have suffered a 25-percent reduction in gross receipts, and have used or will use the full amount of their first PPP loan.

A borrower may satisfy the revenue-reduction requirement in a couple different ways “First, a borrower may compare its quarterly gross receipts for one quarter in 2020 with its gross receipts for the corresponding quarter of 2019,” Elizabeth L. Lehmann, associate, and Jeffrey B. Scheer, partner, from the Bond, Schoeneck & King PLLC law firm, write in a website article on the new PPP rollout. “Alternatively, borrowers that experienced a reduction in annual receipts of 25 percent or greater in 2020 compared to 2019 may submit copies annual tax forms substantiating the revenue decline (versus submitting documentation for a single quarter).”

At least $15 billion is set aside for additional PPP lending by CFIs. A few days after Jan. 13, additional lenders will be able to submit first and second-draw PPP loan applications, the SBA said. As of press time, no date was specified.

The new PPP round’s changes

Here are some more key changes to this round of PPP compared to how the program operated in 2020:

• PPP borrowers can set their PPP loan’s covered period to be any length between 8 and 24 weeks to best meet their business needs, the SBA says. “In other words, it is no longer required that it is only an 8 or 24-week period, but instead, a covered period can end sometime between the 8 and 24-week period,” Lynn Mucenski-Keck, a partner at The Bonadio Group accounting firm, writes in an article on the firm’s website, breaking down the PPP loan guidance. “Identifying the covered period is important as a loan- forgiveness application is required to be submitted to the lender within 10 months after the end of the loan forgiveness covered period.”

• PPP loans will cover additional expenses, including operations expenditures, property-damage costs, supplier costs, and worker-protection expenditures. 

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

• The PPP provides greater flexibility for seasonal employees.

• Certain existing PPP borrowers can request to modify their first-draw PPP loan amount.

Updated PPP lender forms, guidance, and resources are available at The application for second-draw PPP loans is available at:    

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