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A Summary of the SBA’s Recent New Guidance for PPP and Other Loan Borrowers

01.26.2021

As the Small Business Administration (SBA) continues to provide guidance to help businesses navigating the Paycheck Protection Program (PPP) and other economic relief, below are some of the recent updates.

Gross Receipts and Payroll Costs
The SBA issued guidance on how to calculate revenue reduction and maximum loan amounts for second draw PPP loans. The Q&A defines gross receipts for the purpose of determining eligibility for a second draw loan (for nonprofit and for-profit PPP borrowers), confirms that gross receipts exclude forgiven first draw PPP loan proceeds, and explains how to calculate 2019 payroll costs to determine maximum second draw loan amounts.

Included in the guidance are specific payroll cost calculation methods for nonprofits, self-employed borrowers, partnerships and LLCs, as well as the documentation required for first draw and second draw loans above and below $150,000.

Loan Forgiveness
The SBA’s new interim final rule (IFR) restates loan forgiveness requirements under the CARES Act and updates other forgiveness procedures, including:

  • Second draw PPP loans exceeding $150,000 require the borrower to submit the loan forgiveness application for the first draw loan before or simultaneously with the loan forgiveness application for the second draw loan, even if the calculated amount of forgiveness on the first draw loan is zero.
  • Covered periods for first draw and second draw PPP loans cannot overlap.
  • Second draw borrowers must certify on their loan forgiveness applications that they used all first draw amounts on eligible expenses prior to disbursement of the second draw loan.

New Loan Forgiveness Applications
The SBA also issued updated versions of its three loan forgiveness applications:

  • Form 3508 for borrowers of more than $150,000 in PPP loans
  • Form 3508S for borrowers of $150,000 or less
  • Form 3508EZ for self-employed borrowers with no employees; borrowers who did not reduce wages by more than 25 percent and did not reduce employee hours; and borrowers who did not reduce hours by more than 25 percent and were unable to operate at the same level of business activity as before February 15, 2020

New Disclosure Form for Controlling Interests
The new form Borrower's Disclosure of Certain Controlling Interests is required for certain PPP borrowers that received first draw loans before December 27, 2020.

As required under the Economic Aid Act, this form will allow borrowers to disclose if a covered individual directly or indirectly held a controlling interest in the borrower at the time the PPP loan application was submitted to the lender. Covered individuals include the President and Vice President of the U.S., members of Congress, heads of executive departments, or the spouse of any such U.S. government official.

Borrowers of Non-PPP SBA Loans Receive Extended Relief
The SBA also announced it will extend its coverage of payments missed by borrowers of non-PPP 7(a) loans, 504 loans and microloans. The Economic Aid Act extended the CARES Act’s original six-month reprieve. The length of payment coverage depends on the type of loan and when it was issued.

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