ppp second draw issues

Allowing borrowers to calculate payroll costs based on calendar year 2020 is also not expected to result in a significant difference in payroll costs compared to the twelve months preceding the date the loan is made because all Second Draw PPP Loans will be made in the first quarter of 2021. Cooper called the budget situation "the worst in Metro's history.". documents in the last year, by the International Trade Commission January 14, 2021) and PPP Second Draw Loans (86 FR 3712, January 14, 2021). At the same time, these procedures do not disqualify an eligible unresolved borrower from receiving a Second Draw PPP Loan, in recognition that many flags will be resolved in the borrower's favor. With respect to a lender that relies on such a certification or documentation related to a Second Draw PPP Loan, an enforcement action may not be taken against the lender, and the lender shall not be subject to any penalties relating to loan origination or forgiveness of the Second Draw PPP Loan, if(A) the lender acts in good faith relating to loan origination or forgiveness of the Second Draw PPP Loan based on that reliance; and (B) all other relevant Federal, State, local, and other statutory and regulatory requirements applicable to the lender are satisfied with respect to the Second Draw PPP Loan. All other items, such as subcontractor costs, reimbursements for purchases a contractor makes at a customer's request, investment income, and employee-based costs such as payroll taxes, may not be excluded from gross receipts. ( PPP . Loan forgiveness of Second Draw PPP Loans and the loan review process for Second Draw PPP Loans are generally subject to the interim final rules regarding Loan Forgiveness and SBA Loan Review Procedures and Related Borrower and Lender Responsibilities, as modified to conform to the Economic Aid Act by the Consolidated First Draw PPP IFR, which is being published concurrently with this IFR. (C) was in business as of February 15, 2020; is calculated according to (ii) or (iii) of this subsection(e)(6), depending on whether the borrower has employees. on Accordingly, a single business entity that is assigned a NAICS code beginning with 72 is eligible to receive a Second Draw PPP Loan if it employs no more than 300 employees per physical location and meets the revenue reduction requirements and otherwise satisfies the eligibility criteria described in this IFR. The PPP is now a $284 billion refundable loan offering aimed at struggling small businesses. Register documents. Second Draw PPP Loans generally are guaranteed by SBA under the same terms, conditions, and processes as First Draw PPP Loans. This prototype edition of the without regard for whether such a station is a concern as defined in 13 CFR 121.105, or any successor thereto) that employs not more than 300 employees, per physical location of such business concern and is majority owned or controlled by a business concern that is assigned a NAICS code beginning with 511110 or 5151; or. Federal Register issue. These methodologies are based on the corresponding methodologies for self-employed individuals and partnerships that are used for First Draw PPP Loans. partnerships between a public agency and one or several private firms, was excluded. Federal Register provide legal notice to the public and judicial notice These categories of prohibited borrowers are listed in subsection (e) of the IFR: In addition, subsection (e)(9) of this IFR provides that an entity that has previously received a Second Draw PPP Loan may not receive another Second Draw PPP Loan, as required by the Economic Aid Act. Relative to First Draw PPP loans, the Economic Aid Act adjusted the methodology for calculating a borrower's payroll costs. that is not more than $100,000, divided by 12; (2) the average total monthly payment for employee payroll costs incurred or paid by the borrower during the same year elected by the borrower; by, (B) 2.5 (or, only for a borrower assigned a NAICS code beginning with 72 as defined in subsection (f)(10) at the time of disbursal, 3.5); or. 78c(a)) (except SBA will not consider whether a news organization that is eligible under subsection (c)(4) is affiliated with an entity, which includes any entity that owns or controls such news organization, that is an issuer); (8) an entity that has previously received a Second Draw PPP Loan; or. The requirements applicable to PPP lenders are in sections (C) and (D) of the Consolidated First Draw PPP IFR. The rules applicable to Second Draw PPP Loans are published in section IV of this IFR. SBA has determined that this rule will impose new recordkeeping or reporting requirements under the Paperwork Reduction Act (PRA). SBA capping of first- and second-draw PPP loan amount SBA's loan processing system has put in place a loan eligibility amount cap of $35,000 per employee for both first- and second-draw applications, the AICPA letter says, adding that the cap results in the SBA E-Tran system reducing the approved loan amounts. About the Federal Register By Matthew Rambaran, Manager CLA T. 267.419.1145 Email. This article includes those changes as they affect Second Draw PPP Loans. (v) For loans with a principal amount of $150,000 or less, the applicant must submit documentation sufficient to establish that the applicant experienced a reduction in revenue as provided in subsection (c)(1)(i) of this section at the time of application, on or before the date the borrower submits an application for loan forgiveness, or, if the borrower does not apply for loan forgiveness, at SBA's request. This IFR clarifies that the same general calculation for farmers and ranchers applicable to First Draw PPP Loans applies to Second Draw PPP Loans, with adjustments that (i) eliminate the provision for refinancing of an Economic Injury Disaster Loan (EIDL), which does not apply to Second Draw PPP Loans, and (ii) apply the choice of time period for calculating a farmer's or rancher's payroll costs for Second Draw PPP Loans, consistent with other Second Draw PPP Loans. (A) Confirm receipt of borrower certifications contained in Paycheck Protection Program Second Draw Borrower Application Form (SBA Form 2483-SD) or lender's equivalent; (B) Confirm receipt of information demonstrating that a borrower was either an eligible self-employed individual, independent contractor, or sole proprietorship with no employees or had employees for whom the borrower paid salaries and payroll taxes on or around February 15, 2020; (C) Confirm the dollar amount of average monthly payroll costs for 2019 or 2020 (whichever was used to calculate loan amount) by reviewing the payroll documentation submitted with the borrower's application; (D) For a Second Draw PPP Loan greater than $150,000 or a loan of $150,000 or less where the borrower provides documentation of revenue reduction, confirm the dollar amount and percentage of the borrower's revenue reduction by performing a good faith review, in a reasonable time, of the borrower's calculations and supporting documents concerning the borrower's revenue reduction. This information collection (IC) consists of SBA Form 2483-SD (Paycheck Protection Program Second Draw Application Form) and SBA Form 2484-SD (Paycheck Protection Program Lender's ApplicationSecond Draw Loan Guaranty. The intent of the Economic Aid Act is that SBA provide relief to America's small businesses expeditiously. 37. 14. Loans of $150,000 or less account for 93% of outstanding PPP loans, the SBA said. documents in the last year, 1489 Borrowers calculate their average monthly payroll in either 2019, 2020 or their trailing 12 months. This clarification will help ensure program integrity by preventing a borrower from receiving a Second Draw PPP Loan if the borrower has not complied with PPP loan program requirements.[6]. Information about this document as published in the Federal Register. 4 . The deadline of May 31, 2021 is the same for both applications. 636(a)(37)). (4) The maximum amount of a Second Draw PPP Loan to a borrower that did not exist during the 1-year period preceding February 15, 2020, but was in operation on February 15, 2020 (new entity), is calculated as the lesser of: (1) The sum of the total monthly payments by the borrower for payroll costs paid or incurred by the borrower as of the date on which the borrower applies for the Second Draw PPP Loan; by, (2) the number of months in which those payroll costs were paid or incurred; by. (3) On the Second Draw PPP Loan borrower application, an authorized representative of the applicant[38] (2) At the time an applicant submits its loan application form, it must submit the following unless the documentation was submitted to the lender for the First Draw PPP Loan (i.e., the applicant used calendar year 2019 figures to determine both its First Draw PPP Loan amount and its Second Draw PPP Loan amount, and the lender for the applicant's Second Draw PPP Loan is the same as the lender that made the applicant's First Draw PPP Loan): (i) If the applicant is not self-employed, the applicant's Form 941 (or other tax forms containing similar information) and state quarterly wage unemployment insurance tax reporting forms from each quarter in 2019 or 2020 (whichever was used to calculate payroll), as applicable, or equivalent payroll processor records, along with evidence of any retirement and employee group health, life, disability, vision and dental insurance contributions, must be provided. L. 116-260) into law to provide continued assistance to individuals and businesses that have been financially impacted by the ongoing coronavirus pandemic. and all PPP loan program requirements, except as specified in this IFR. (ii) If a borrower meeting the criteria in subsection (6)(i) of this section does not have any employees, the maximum loan amount is the product obtained by multiplying: (A) The gross income of the borrower in 2019 or 2020, as reported on a Schedule F (IRS Form 1040), that is not more than $100,000, divided by 12; and. These include, but are not limited to the following terms: The guarantee percentage is 100 percent. has no substantive legal effect. [9] For second-draw loans, the SBA's system reviews a borrower's prior PPP application, as well as business databases, which may include Dun & Bradstreet and LexisNexis. No collateral will be required. Pursuant to section 808(2) of the CRA, SBA finds, for good cause, that a 60-day delay in the effective date is unnecessary and contrary to the public interest. If the lender identifies errors in the borrower's calculation or material lack of substantiation in the borrower's supporting documents, the lender should work with the borrower to remedy the issue. Except for small government jurisdictions with a population of less than 50,000, neither State nor local governments are small entities.. Draw the structure of the compound identified by the simulated - H NMR and IC NMR spectra. SBA will resolve issues related to unresolved borrowers expeditiously. Similarly, local municipalities throughout the country will have to deal with revenue loss created by COVID-19. Paragraph 7(a)(37)(O) of the Small Business Act provides that a Second Draw PPP Loan may be made only to a borrower that received a First Draw PPP Loan under paragraph 7(a)(36). The loan amounts received by borrowers for First Draw PPP Loans and Second Draw PPP Loans will not be aggregated. ), that has more than one physical location and that employs not more than 300 employees per physical location is eligible to receive a Second Draw PPP Loan if it meets the eligibility criteria in subsection (c)(1) and: (1) Is majority owned or controlled by a business concern that is assigned a NAICS code beginning with 511110 or 5151 or, with respect to a public broadcasting entity (as defined in section 397(11) of the Communications Act of 1934 (47 U.S.C. (1) If a First Draw PPP Loan is under review pursuant to PPP rules and/or information in SBA's possession indicates that the borrower may have been ineligible for the First Draw PPP Loan it received or for the loan amount received by the borrower, the lender will receive notification from SBA when the lender submits an application for guaranty of a Second Draw PPP Loan (unresolved borrower). (ii) an authorized representative of the applicant must also certify: (A) The Applicant has realized a reduction in gross receipts in excess of 25% relative to the relevant comparison time period. In place to avoid making superfluous PPP loan payments, loan must submit loan forgiveness applications to their lenders within 10 months free the end of their respective covered periods. 11. Paragraph 7(a)(37)(E) of the Small Business Act. Ch.1. These include, but are not limited to the following terms: Subsection (b) of this IFR confirms that these terms apply to Second Draw PPP Loans. Paragraph 7(a)(37)(D) of the Small Business Act. of the issuing agency. The agency must, however, publish the certification in the Federal Register at the time of publication of the rule, along with a statement providing the factual basis for such certification. If the agency head has not waived the requirements for a regulatory flexibility analysis in accordance with the RFA's waiver provision, and no other RFA exception applies, the agency must prepare the regulatory flexibility analysis and publish it in the Federal Register at the time of promulgation or, if the rule is promulgated in response to an emergency that makes timely compliance impracticable, within 180 days of publication of the final rule. Second Draw PPP Loan borrowers who are not self-employed, sole proprietorships, or independent contractors are also permitted to use the precise 1-year period before the date on which the loan is made to calculate payroll costs if they choose not to use 2019 or 2020. Key insights. The Administrator of OIRA has determined that this is a major rule for purposes of the Congressional Review Act (5 U.S.C. Economic Aid Act Provides Second Draw PPP Loans, Jan. 15, 2021 SBA to Require PPP Borrowers of $2 Million-Plus to Complete Loan Necessity Questionnaires, November 24, 2020 SBA Issues Much-Anticipated Guidance Regarding Changes of Ownership in PPP Loans, October 8, 2020 A borrower that has temporarily closed or temporarily suspended its business remains eligible for a Second Draw PPP Loan. The Economic Aid Act included a new payroll cost calculation for farmers and ranchers receiving First Draw PPP Loans. The PPP provided more than 11.7 million forgivable loans totaling nearly $800 billion to small businesses and other eligible entities hurt by the economic impacts of the COVID-19 pandemic. (vi) All loans will be processed by all lenders under delegated authority and lenders will be permitted to rely on certifications of the borrower in order to determine eligibility of the borrower and the use of loan proceeds. However, if a concern acquired a segregable division of another business concern during 2020, gross receipts do not include the receipts of the acquired division prior to the acquisition. Certain 2020 first draw PPP loans were flagged with hold codes after SBA review. The Administrator, in consultation with the Secretary, has determined that this methodology is necessary to provide small businesses in the accommodation and food services sector the full amount of relief provided in the Economic Aid Act while allowing these borrowers to calculate their average monthly payroll costs accurately. Subsections (f)(7) and (f)(8) of the IFR include tailored calculation methodologies for self-employed individuals and partnerships. Under the CARES Act, any single business entity that is assigned a NAICS code beginning with 72 (including hotels and restaurants) and employs not more than 500 employees per physical location is eligible to receive a First Draw PPP Loan. documents in the last year, 438 SBA guarantees 100 percent of Second Draw PPP Loans and SBA may forgive up to the full principal loan amount. 5 U.S.C. Subsection (g) of this IFR contains the provisions specific to lenders for Second Draw PPP Loans. If the lender identifies errors in the borrower's calculation or a material lack of substantiation in the borrower's supporting documents, the lender should work with the borrower to remedy the issue. Second Draw PPP Loans are generally subject to the same terms, conditions and requirements as First Draw PPP Loans, including but not limited to: 100 percent guaranteed by the SBA no collateral no personal guarantees 1 percent interest rate (calculated on a noncompounding, nonadjustable basis). FAQ #63 and subsection (c) of the interim final rule for Second Draw PPP Loans. Preserving funds for such businesses is necessary because only businesses that are still in operation will retain employees, which is a primary purpose of the PPP. (B) An applicant that was in operation in all four quarters of 2019 is deemed to have experienced the revenue reduction in subsection (c)(1)(iv)(A)(1) if it experienced a reduction in annual receipts of 25 percent or greater in 2020 compared to 2019 and the borrower submits copies of its annual tax forms substantiating the revenue decline. On January 6, 2020, the SBA published its 26 th Interim Final Rule (the First Draw PPP IFR) and 27 th Interim Final Rule (the Second Draw PPP IFR) with respect to the Paycheck Protection Program (PPP), as reauthorized and modified under Title III (cited as the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (the Economic Aid Act)) of Division N of the Consolidated . 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