The Small Business Administration (SBA) has issued two new Interim Final Rules (IFRs) addressing “First Draw” and “Second Draw” Paycheck Protection Program (PPP) loans authorized under the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act (Act).
The first IFR (First IFR) consolidates all interim final rules and guidance issued to date, governing borrower eligibility, lender eligibility and PPP application and origination requirements for new PPP loans, and provides general rules relating to loan increases and loan forgiveness. The First IFR also reflects changes to PPP loans implemented by the new Act. Among those changes, the Act changed the loan forgiveness covered period from either an eight- or 24-week period, to a covered period between eight and 24 weeks, at the election of the borrower. The First IFR clarifies that debtors in bankruptcy proceedings are still ineligible to receive a PPP loan. Further, the First IFR provides that “[a]ny EIDL Advance Amounts previously deducted from a borrower’s forgiveness amount will be remitted to the lender, together with interest to the remittance date.”
The second IFR (Second IFR) provides guidance and clarification on “Second Draw” PPP loans. A borrower is only eligible for a “Second Draw” loan if the borrower: (i) received a “First Draw” loan; and (ii) has used or will use the full amount of the “First Draw” loan for eligible expenses on or before the “Second Draw” loan disbursement date. “Second Draw” PPP loans are generally subject to the same terms as the original “First Draw” PPP loans. See our prior eAlert for many of those terms as well as the basic eligibility requirements for “Second Draw” loans. In order to apply for a “Second Draw” loan, an applicant must submit to its lender the SBA Form 2483-SD (Paycheck Protection Program Second Draw Borrower Application Form) or the lender’s equivalent form including the required certifications and the documentation.
Community Financial Institutions (CFIs) began accepting “First Draw” loan applications on January 11, 2021. CFIs began accepting “Second Draw” loan applications on January 13, 2021. PPP-eligible lenders with $1 billion or less in assets will be allowed to accept “First Draw” and “Second Draw” loan applications beginning Friday, January 15, 2021. All other lenders will be allowed to accept “First Draw” and “Second Draw” loan applications beginning Tuesday, January 19, 2021.
The last day to apply for and receive a “First Draw” or “Second Draw” PPP loan is March 31, 2021.
The rules surrounding PPP loans are complex and business specific. If you have concerns about the rules, please contact Ford Turrell, Timothy Hillegonds, Rob Davies, Matthew Crowe, Charlie Goode, Jeffrey Ott or your Warner attorney.