Economic Aid Act – CARES ACT

On December 27, 2020, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Economic Aid Act) (Pub. L. 116-260) became law. The Economic Aid Act extends the authority to make PPP loans through March 31, 2021 and revises certain PPP requirements.

On January 6, 2021 guidance was given thru the U.S. Department of the Treasury’s website. For the entire Interim Final Rule on Paycheck Protection Program as Amended by Economic Aid Act click here. And for the Interim Final Rule on Second Draw Loans click here.

This PPP opens Monday January 11, 2021 and closes March 31, 2021. If the institutions do as they did the first time, they will no longer take applications about a week before the closing date, so check with your financial institution for their opening and closing dates as I am sure each bank will have their own process for you to follow.

My summary of the PPP portion of the Act is as follows

There are two new programs

1) For those that did NOT get a PPP loan the first time (More on this further below) the application process has re-opened

2) For those that DID get a PPP loan the first time you can apply for a Second Draw PPP loan

• Previously received a First Draw PPP Loan and will or has used the full amount only for authorized uses;
• Has no more than 300 employees; and
• Can demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020.

If you were in operation in all four quarters of 2019, you may use annual receipts to document the 25% reduction in 2020.

NAICS Sector 72—Accommodation and Food Services, you can use 3.5 months of payroll costs rather than 2.5 months in your loan calculation.

Now a bit more on the re-opening of the PPP for First Draw Loans

1. Eligible small entities that have 500 or fewer employees—including nonprofits, Veterans organizations, tribal concerns, self-employed individuals, sole proprietorships, and independent contractors, and
2. You were in operation on February 15, 2020, and either had
• a) employees for whom you paid salaries and payroll taxes or paid independent contractors, as reported on a Form 1099-Misc, or
• b) you were an eligible self-employed individual, independent contractor, or sole proprietorship with no employees
3. Existing PPP borrowers that did not receive loan forgiveness by December 27, 2020 may
• Reapply for a First Draw PPP Loan if they previously returned some or all of their First Draw PPP Loan funds, or
• Request to modify their First Draw PPP Loan amount if they previously did not accept the full amount for which they are eligible.

I believe this is available to those that did not receive the correct amount due to incorrect calculations, but you may be further ahead to just move to the Second Draw program since you did receive a PPP in the first round.

You have the choice to use 2019 or 2020 figures to calculate the maximum loan amount.

Please review the complete rules at the links above to see if either of these programs apply to you.