The SBA will open the application window for PPP loans from all lenders starting at 9 a.m. EST on Tuesday, January 19th. All borrowers seeking either a first or second-draw PPP loan are will be eligible to apply at that time.
Small lenders with under $1 billion in assets will be able to submit loan applications beginning on Friday, January 15th. The SBA had started accepting applications from community banks serving minority and women-owned businesses earlier this week.
We strongly encourage applicants to compile any necessary documentation in advance of next Tuesday. Most critical for second-draw borrowers is the requirement that they experienced a 25% reduction in quarterly revenue for at least one quarter of 2020 compared to that same quarter for 2019. Borrowers seeking a second-draw loan of more than $150,000 will need to disclose which quarter the 25% decrease occurred in and provide supporting documentation. Borrowers applying for a loan of $150,000 or under will not be required to provide this information at that time of application but will need to provide supporting documentation when they apply for forgiveness.
Borrowers seeking a second-draw loan are also eligible to calculate the size of their loan based on either 2019 or 2020 annual payroll (or a prior twelve-month period from the date of application). For Schedule C taxpayers, this means they are eligible to use either 2019 or 2020 net profit. Borrowers applying for a second-draw loan with the same bank that they used for the first-draw loan are not expected to be required to resubmit any additional payroll documentation if they opt to use 2019 payroll information. Borrowers choosing to use 2020 payroll costs should be prepared to submit supporting schedules and quarterly payroll tax information to their lender.
Applicants falling under the SBA affiliate rules may be impacted by new limitations for second-draw loans. The maximum allowable employee headcount has been reduced from 500 to 300 and the maximum cumulative second-draw loans between all affiliated entities was reduced to $2 million compared to $10 million for first-draw loans. Affiliates must also aggregate gross receipts between all entities when assessing the 25% revenue reduction requirement.
Please contact us if you have any additional questions.