The Second Draw Rules address the new PPP loans available for borrowers. These are generally subject to the same terms and conditions as the first draw PPP loans, which are described more fully below. The Consolidated Initial Rules, in the SBA’s own words, primarily “restates existing regulatory provisions to provide lenders and new PPP borrowers a single regulation to consult on borrower eligibility, lender eligibility, and loan application and origination requirements, as well as general rules on increases and loan forgiveness for PPP loans.”[1] To enhance the “readability” of the guidance, the Consolidated Initial Rules generally does not include the policy and legal justifications for the existing regulatory provisions, but those can be found in the original interim final rules.
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On December 27, 2020 the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (the Economic Aid Act) was signed into law, which reopened the Paycheck Protection Program (PPP) both to first-time borrowers and, subject to stricter conditions and limits, to borrowers that previously received a PPP loan (second draw borrowers).
[1] Under the Economic Aid Act, the last day to apply for and receive a loan under the reopened PPP is March 31, 2021. The Small Business Administration (SBA) and the Department of the Treasury (Treasury) have recently issued various interim final rules, borrower and lender application forms, and other guidance in connection with the reopened PPP.
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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.
The Coronavirus Aid, Relief, and Economic Security Act (as amended and modified, the “CARES Act”) was enacted to provide immediate assistance to individuals, families, and businesses.
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The SBA, in consultation with the Department of Treasury, has announced that it is reopening its portal for first draw and second draw PPP applications to all eligible PPP lenders today, January 19, 2021. The portal had previously been reopened to community financial institutions for first draw applications on Jan. 11 and second draw applications on Jan. 13 and to small eligible lenders (those will less than $1 billion in assets) on Jan. 15.
The deadline for submitting applications is March 31, 2021. Eligible borrowers desiring to apply for a first draw PPP loan (or increase in a first draw PPP loan) or second draw PPP loan should do so as soon as practicable in view of the funding available under the Economic Aid Act and last year s experience with applications for first round PPP loans.