What Was Third-Round Paycheck Protection Program (PPP) Funding?

Sources: H.R. 748, H.R. 266, H.R. 133

Adjustments to the PPP Program Introduced by the Biden Administration

On Feb. 22, 2021, the White Home introduced 5 modifications to the Paycheck Safety Program. One change had a set time period of two weeks. The opposite 4 could be efficient till no less than the tip of March 2021.

These modifications have been designed to make PPP funds out there to very small companies and others that had been inadequately helped by this system, based on the Biden administration.

• Starting on Wed., Feb. 24, 2021 by way of Tue. March 9, 2021, companies with fewer than 20 workers have been permitted to use for PPP funding.
• The formulation used to calculate PPP loans was revised to supply extra funding for sole proprietors, unbiased contractors, and self-employed people. A further $1 billion was allotted for these people in low-and moderate-income (LMI) areas.
• Eligibility for PPP funding was prolonged to small enterprise house owners with non-fraud associated felonies so long as the applicant was not incarcerated on the time of the applying.
• Enterprise house owners with delinquent federal scholar loans have been eligible for a PPP mortgage.
• Non-citizens who have been lawful U.S. residents have been additionally eligible and allowed to make use of their Particular person Taxpayer Identification Numbers (ITINs) to use.

First-Draw vs. Second-Draw Loans

The CAA offered for 2 varieties of spherical three PPP loans. The primary sort was preliminary or first-draw loans as much as $10 million for entities that had by no means acquired a PPP mortgage. The second sort was second-draw loans of as much as $2 million for entities that had acquired PPP loans.

Following steerage from the U.S. Small Enterprise Administration (SBA) and Treasury Division, neighborhood monetary establishments together with Neighborhood Improvement Monetary Establishments (CDFIs) started making first-draw PPP loans on Mon., Jan. 11, and second-draw loans on Wed., Jan. 13. 

Small lenders with lower than $1 billion in property have been slated to start making each first- and second-draw loans on Fri., Jan. 15. All authorized PPP lenders may start lending on Tues., Jan. 19, 2021.

PPP Third-Spherical Normal Phrases and Circumstances

Each first- and second-draw PPP loans have been topic (however not restricted) to the identical common phrases and situations as authentic PPP loans below the CARES Act:

• Loans have been 100% assured by the federal government.
• No collateral was required.
• No private ensures have been required.
• The rate of interest for all loans was 1% and maturity was 5 years.

PPP Third-Spherical Eligible Entities

Whereas there have been key variations between first- and second-draw PPP loans, the varieties of eligible entities have been the identical.

• Small companies with 500 or fewer workers (300 or fewer for second-draw loans)
• Companies categorized as “Lodging or Meals Providers” akin to eating places and inns with 500 or fewer workers per location (300 or fewer for second-draw loans)
• Independently owned franchises
• Self-employed staff, unbiased contractors, gig staff, and sole proprietors
• 501(c)(3) companies or tax-exempt nonprofit organizations; tax-exempt 501(c)(19) veterans organizations; 31(b)(2)(C) tribal enterprise issues
• Housing cooperatives; eligible part 501(c)(6) organizations, or eligible vacation spot advertising and marketing organizations with 300 or fewer workers
• Information organizations that have been majority-owned or managed by a NAICS code 511110 or 5151 enterprise or a nonprofit public broadcasting entity with a commerce or enterprise below NAICS 511110 or 5151 with 500 or fewer workers
• Enterprise will need to have been in operation on Feb. 15, 2020

Extra Second-Draw Necessities

Second-draw PPP loans had some restrictions that first-draw loans did not have. Companies could not obtain a second-draw mortgage of as much as $2 million except they met the next situations:

• They’d acquired and used (or anticipated to make use of) all proceeds from the first-draw mortgage by the point they acquired (or anticipated to obtain) the second-draw mortgage proceeds
• They’d 300 or fewer workers
• They might reveal that they skilled a lack of no less than 25% of gross receipts in any quarter throughout 2020 in comparison with the identical quarter in 2019
• They spent all proceeds from their first-draw mortgage on eligible bills

Second-Draw Borrower Exclusions

Spherical 3 tips excluded companies from a second-draw mortgage if an organization was:

• Completely closed
• Ineligible below present SBA laws
• Primarily engaged in lobbying or different political actions
• Owned by an entity created in, or with important operations in, the Individuals’s Republic of China or the Particular Administrative Area of Hong Kong
• Included a board member who was a resident of the Individuals’s Republic of China
• A recipient of a shuttered venue operator grant below Part 24 of the Act.

Required Certifications for PPP Loans

Companies have been required to certify that pandemic-related financial uncertainty made the mortgage request essential to assist ongoing operations and that funds could be used as required. This included utilizing not more than 40% for non-payroll prices. This requirement utilized to each first- and second-draw PPP loans.

Particular New Set-Apart Funding

Spherical 3 included particular set-aside funding for particular teams of first- and second-draw debtors.

• $15 billion for lending by neighborhood monetary establishments
• $15 billion for lending by insured depository establishments, Credit score Unions, and Farm Credit score System establishments with consolidated property of lower than $10 billion
• $35 billion for brand spanking new first-draw PPP debtors
• $15 billion and $25 billion for first-draw and second-draw PPP loans for debtors with 10 workers or fewer, or for loans of lower than $250,000 to debtors in low-or moderate-income neighborhoods

Utility Dates for a Third-Spherical PPP Mortgage

As famous above, purposes for Spherical 3 first-draw PPP loans from authorized neighborhood monetary establishments began Mon., Jan. 11, 2021. Second-draw purposes started on Wed., Jan. 13. That was adopted by first- and second-draw loans from small lenders with lower than $1 billion in property on Fri., Jan. 15, 2021. All SBA 7(a) lenders have been authorized to simply accept first and second draw purposes beginning on Tues., Jan. 19, 2021.

Third-Spherical PPP Utility Deadline

The Consolidated Appropriations Act, 2021 (CAA) prolonged the Paycheck Safety Program (PPP) by way of March 31, 2021 or till funds ran out. PPP funds have been exhausted as of Could 31, 2021, which means the PPP program was not out there as of that date.

The quantity of funds made out there within the third spherical totaled $284 billion. Most loans of $10 million have been out there to first-draw debtors, and loans as much as $2 million have been supplied to second-draw, small enterprise house owners.

Utility Course of for a Third-Spherical PPP Mortgage

New first- and second-draw loans adopted a sample just like that adopted with earlier PPP loans. Enterprise house owners may obtain and fill out the mortgage utility from the SBA web site.

The primary-draw utility was 5 pages lengthy, together with directions, and the second-draw utility was six pages, together with directions.

Coated Interval for Third-Spherical PPP

Spherical 1 and Spherical 2 PPP loans stipulated that the interval throughout which a enterprise had to make use of its mortgage proceeds (the coated interval) was an eight-week interval starting on the date the enterprise acquired its mortgage proceeds. That was later expanded to 24 weeks.

Spherical 3 allowed a enterprise to decide on any size interval between eight weeks and 24 weeks, giving it extra management over how one can deal with any wanted reductions in a workforce, as soon as PPP funds have been depleted.

Use of Third-Spherical PPP Funds

The CAA expanded the varieties of bills for which a enterprise may use Spherical 3 PPP funds. This additionally utilized to present PPP mortgage funds (except the enterprise already had obtained forgiveness).

Along with payroll, lease, coated mortgage curiosity, and utilities, the Paycheck Safety Program allowed a enterprise to make use of mortgage proceeds for:

• Sure operations bills together with enterprise software program; business-related cloud computing providers; services or products supply; payroll processing, fee, and monitoring prices; HR and billing features; monitoring of provides, stock, data, and bills
• Coated property harm prices together with prices associated to break or vandalism brought on by looting or public disturbances in 2020 that weren’t coated by insurance coverage or different compensation
• Listed provider prices together with funds to a provider of products that have been important to operations and made pursuant to a contract or order in impact at any time earlier than the coated interval or, with respect to perishable items, in impact at any time through the coated interval
• Coated employee safety bills together with working or capital expenditures required to adjust to necessities or steerage issued by the CDC, HHS, OSHA, or any state or native authorities through the interval starting March 1, 2020, and ending on the date when the nationwide emergency expired

Tax Remedy of Third-Spherical PPP Loans

Spherical 3 PPP loans weren’t included in an organization’s taxable earnings. If a mortgage was forgiven, bills paid with the proceeds of the mortgage have been tax-deductible. Additional, this rule utilized to new, present, and former PPP loans. As well as, any earnings tax foundation enhance that resulted from a PPP mortgage remained even when the PPP mortgage was finally forgiven.