Overview of the Economic Aid Act’s Paycheck Protection Program
On December 27, 2020, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Economic Aid Act) became law, extending the US Small Business Administration’s (SBA) ability to make loans with the Paycheck Protection Program (PPP) through March 31, 2021, and revising certain PPP requirements. The program initially became operational on April 2, 2020, when the SBA announced its implementation of sections 1102 and 1106 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Throughout 2020, the SBA and Department of the Treasury subsequently provided additional guidance on the PPP. Most recently, on January 6, 2021, the SBA issued two Interim Final Rules — Business Loan Program Temporary Changes; Paycheck Protection Program as Amended by Economic Aid Act and Business Loan Program Temporary Changes; Paycheck Protection Program Second Draw Loans — clarifying updates and changes made to the PPP under the Economic Aid Act. The following client alerts summarize these key implementations:
First-Time PPP Borrowers: What Do I Need to Know About Applying for a First Draw PPP Loan? The Economic Aid Act extended the ability for first-time borrowers to apply for a First Draw PPP Loan through March 31, 2021. This alert summarizes the eligibility requirements for First Draw PPP borrowers, terms and conditions for First Draw PPP Loans, and the application and forgiveness processes for a First Draw PPP Loan. Of note, the ability to participate for the first time in the PPP loan program has now been extended to 501(c)(6) organizations other than unions, but public companies are excluded from eligibility. The Economic Aid Act introduced some flexibility for borrowers to select their loan forgiveness covered period at any point between eight weeks and 24 weeks.
Current PPP Borrowers: How Do I Apply for a Second Draw PPP Loan? The Economic Aid Act allows an eligible entity that previously received a PPP loan to apply for a Second Draw PPP Loan. This alert discusses the eligibility requirements for Second Draw PPP borrowers, terms and conditions for Second Draw PPP Loans, key differences between First Draw and Second Draw PPP Loans, and the application and forgiveness processes for a Second Draw PPP Loan.
Current PPP Borrowers: What Do I Need to Know About the Economic Aid Act? The Economic Aid Act provided several updates and clarifications for PPP borrowers and made changes to the loan forgiveness process. The Economic Aid Act also confirmed that eligible payroll expenses include employer-provided group insurance benefits, such as life, disability, vision, and dental insurance. In addition, it expanded the categories of eligible non-payroll expenses. The SBA has also been instructed under the new bill to create a simplified loan forgiveness application process for borrowers with loans of $150,000 or less. Additional guidance from the SBA on the loan forgiveness process is forthcoming.
Eligible or potential borrowers that need help navigating these PPP requirements and rules should reach out to their counsel before and during the application process.