The Small Business Administration has just reopened the Paycheck Protection Program (PPP), making $284 billion available to new borrowers, as well as certain businesses that had previously received a PPP loan from the initial PPP allocation.
The new funding was part of the Economic Aid to Hard-Hit Small Businesses, Non-Profits, and Venues Act. Applications from First Draw (new) PPP loan borrowers are being accepted now by a limited number of financial institutions. Lenders will start accepting Second Draw PPP Loan applications from borrowers who received a prior PPP loan on January 13, 2021.
Under the new PPP loan program:
- there may be a time lapse between loan application and loan funding, but the loan forgiveness process should be quicker;
- the maximum potential loan amounts for Second Draw PPP loans is $2 million per loan and $4 million per corporate group;
- borrowers can adopt covered periods of 8-24 weeks;
- in addition to previously allowed expenses, new loan proceeds may be used for certain operational, property damage, supplier and worker protection expenditures;
- certain First Draw PPP Loan borrowers are eligible to modify their loan amounts.
A PPP borrower is generally eligible to apply for a Second Draw PPP loan if it:
- has received a First Draw PPP loan and fully uses the proceeds for authorized expenses only;
- has no more than 300 employees; and
- can show at least a 25% reduction in gross receipts between comparable calendar quarters in 2019 and 2020.
Important: Dealerships applying for a new PPP loan must certify that the loan is “necessary to support ongoing business operations in light of current economic conditions.” This parallels the certification dealerships made when applying for PPP loans in 2020. But for many dealerships, current market conditions and economic circumstances are better than what they were when PPP loan applications were filed between April and August 2020.
SBA is expected to issue additional guidance on the new PPP. Dealers are encouraged to consult their attorneys and accountants to determine whether they are eligible for a second PPP loan and whether it makes sense to apply.