Client Alert: New PPP Loan Program
- Review our updated CARES Act Paycheck Protection Program FAQs, which contain practical information and suggestions for your bank, along with in-depth analysis of the new PPP program.
New PPP Loan Program
The SBA has officially reopened the PPP program, as authorized by the Economic Aid to Hard-Hit Small Businesses, Non-Profits, and Venues Act, which was signed into law on December 27, 2020 (the “Economic Aid Act”). On January 6, 2021, the SBA issued interim final rules (the “IFRs”) and recently held, in conjunction with federal banking regulators, an “Ask the Regulators” webinar. Based on the Economic Aid Act, the IFRs, and additional regulatory commentary, we have updated our CARES Act Paycheck Protection Program FAQs.
Some of the highlights of the new PPP program are:
$284.45 Billion in New Funding. The $284.45 billion authorized is divided into various buckets, including funds to be lent by Community Development Financial Institutions and financial institutions with less than $1 billion in assets. Funding will be further allocated between First Draw PPP loans and Second Draw PPP loans (defined below).
First Draw PPP Loans. The new PPP program allows borrowers that did not receive a PPP loan (or returned the PPP funds previously received) in 2020 to receive a PPP loan (a “First Draw” PPP loan).
Second Draw PPP Loans. The new PPP program also allows borrowers that received a PPP loan in 2020 to receive a second PPP loan (a “Second Draw” PPP loan), subject to certain eligibility requirements.
Permitted Uses of PPP Loan Funds. The permitted uses of PPP funds have been expanded to include repair costs incurred due to damage caused by riots or vandalism in 2020.
Application Deadline. Borrowers can apply for a First Draw or Second Draw PPP loan until March 31, 2021. This may change with further legislation.
EIDL Forgiveness. The SBA will no longer deduct Economic Injury Disaster Program Loan (“EIDL”) advances from forgiveness payments, and if the lender already has received a forgiveness payment net of an EIDL advance, the SBA will provide a reconciliation payment to the lender to be applied to the outstanding loan balance.
Simplified Forgiveness. There will be a new simplified forgiveness application for PPP loans in the amount of $150,000 or less.
Lender Hold Harmless Provisions. There are hold harmless provisions for lenders. For example, lenders may rely on borrower certifications and documents under a good faith standard.
Agent Fees. An agent may not claim fees from a lender unless it has directly contracted with the lender.
PPPLF Expanded for new PPP Loans. The Paycheck Protection Program Liquidity Facility is expanded and available for lenders for new First Draw and Second Draw PPP loans.
New SBA Platform. The SBA is building a new combined PPP application and forgiveness platform.
Increased Lender Protections. Lenders may rely on borrower certifications and are not required to perform due diligence.
We Can Help You
Our Firm has been on the forefront of dealing with COVID-19 issues for our clients. We can assist with the unique documentation requirements of both First Draw and Second Draw PPP loans. Please contact us if you would like to discuss any of these issues or if we can otherwise be of assistance.