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On December 27, 2020, the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act (the “Economic Aid Act”) became law. The economy continues to struggle from the effects of the coronavirus pandemic. This new law provides additional support to many small businesses.
So far in the month of January alone, the Treasury Department (the “Treasury”) and the Small Business Administration (SBA) have issued over 200 pages of new interim final rules (the “Interim Rules”) and other written guidance related to modifications of the Paycheck Protection Program (PPP) by the Economic Aid Act. Except to the extent revised by the new Interim Rules, all previously announced Interim Rules and Frequently Asked Questions (FAQs) regarding the PPP continue to apply.
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On December 27, 2020, President Trump signed the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Economic Aid Act) into law to provide continued assistance to individuals and businesses that have been financially impacted by the ongoing coronavirus pandemic. Among its provisions is an extension of the Paycheck Protection Program (PPP) created by the CARES Act, authorizing approximately $284 billion in additional federally backed loans to help small businesses weather economic hardships caused by the pandemic.
The new Economic Aid Act clarified several questions about the PPP loan process, and added new rules for borrowers applying for new PPP loans and seeking forgiveness for previous PPP loans.
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With the latest round of the Paycheck Protection Program comes a pair of interim final rules from the Small Business Administration. Our Financial Services & Products Group explores the significant changes to the PPP brought by the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act.
General changes to the PPP and the first interim final rule
Second draw loans and the second interim final rule
Tax treatment and additional comments
The Small Business Administration (SBA), in consultation with the Treasury Department, approved two interim final rules, effective January 6, 2021, governing the latest iteration of the Paycheck Protection Program (PPP). The rules implement changes to the PPP set forth in the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, enacted on December 27, 2020.
Paycheck Protection Program: Who Can Get It, And How It Works
With the latest COVID-19 relief package including $284 billion for small business loans under the Paycheck Protection Program (PPP), KHTS has compiled a breakdown of who can apply for these loans, and how they work.
As part of the most recent COVID-19 relief package signed at the end of December, $284 billion was allocated for PPP loans, providing much-needed relief to struggling small businesses across the country.
Under the PPP, small business owners apply for the loan with a bank, which then either approves or denies that loan. The U.S. Treasury Department is then set to essentially forgive the debt, allocating billions of dollars to pay the banks back the loaned out money.
On January 6, 2021, Treasury issued two new Interim Final Rules (IFRs) addressing the new Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act’s (Act) creation of PPP Second Draw Loans, and the Act’s various changes to PPP requirements generally. The major PPP components of the Act are set forth in detail in Buchalter’s COVID Alert of December 28, 2020 (Buchalter PPP Changes Alert), which can be found here.
While discussing the Act’s requirements in some detail, the two IFRs made several key clarifications not fully spelled out, or left ambiguous, in the Act:
The time to obtain a PPP loan is extended to March 31, 2021.