September 29, 2020
There is a significant caveat to the provision around another round of PPP in the revised House Dems emergency relief bill. While the provision opens the door to PPP eligibility for businesses with more than 500 employees, to qualify the gross receipts of the eligible recipient during the 1st, 2nd or 3rd Q of 2020 must be less than 25% of the gross receipts of the eligible recipient during the same calendar quarters in 2019.
Please remember: the bill that came out yesterday is a proposal. The parties are still far apart in terms of the total amounts they are willing to spend on another relief package. We have work to do!
Title II – Modifications to the Paycheck Protection Program
Section 201: Extension of covered periods
1. Allows for section 1106 of the CARES Act forgiveness covered period to align with use of the loan by borrowers
- Clarifies that the covered period is defined by a period, selected by the borrower, between 8 and 24 weeks so that the forgiveness calculation that uses the term “covered period” aligns properly. Currently it is a hard 24 weeks and requires administrative guidance to calculate properly.
- Clarifies that a borrower can apply for forgiveness as soon as the covered period is over, their loan has been spent, and they have the documents to substantiate they can comply with the requirements of the program.
Section 202: P4 loans (second PPP loans)
- Creates a Prioritized PPP loan product to give second PPP loans of up to $2 million to certain small entities.
- Targeted to businesses with less than 200 employees that have suffered demonstrably quarterly revenue losses of at least 25 percent. Also creates an application processing priority for very small businesses.
- Excludes publicly traded entities from being eligible for the secondary loans.
- Places limits on businesses with more than 1 physical location.
Section 203: Streamlined forgiveness of small-dollar loans
- Creates a 3-tier system, based on loan size, to allow for simplified forgiveness for loans under $150,000.
- Under $50,000 borrower only need to certify to the Administration they have met therequirements of the program for forgiveness AND must keep documentation available tosubstantiate in the event the Administration audits the loan.
- From $50,000 to $150,000 borrowers must submit the certification to their lender via asimplified forgiveness application AND must keep documentation available to substantiate in theevent the Administration audits the loan.
- Loans over $150,000 are governed by the current documentation submission process.
- Provides for the voluntary submission of demographic data, even if they borrower uses a streamlined forgiveness process.
Section 204: Eligibility of certain organizations under PPP
1. Restricts the compensation of registered lobbyists as permissible uses of PPP loans30
2. Clarifies the definition of housing cooperatives as eligible entities for PPP loans
3. Expands the definition of nonprofits to include all nonprofits no matter their size or type of nonprofit,
with a revenue reduction requirement for nonprofits larger than 500 employees. i. 501(c)(3) with under 500 employees remain under current rules
ii. 501(c)(3) with over 500 employees must meet a revenue test, similar to that of the secondary loan program
iii. Other 501(c) entities under 500 employees must meet the lobbying restrictions
iv. Other 501(c) entities over 500 employees must meet the lobbying restrictions and the
4. Expands PPP loans to destination marketing organizations (DMOs), small, local news broadcast entities;
and certain quasi-public venues eligible
5. Makes critical access hospitals, regardless of bankruptcy status, eligible for a PPP loan.
Section 205: Limits the aggregate loan amount to $10 million for businesses with more than one location
6. Prevents eligible recipients with more than one location from receiving more than $10 million in total PPP loans across all those locations.
Section 206: Expands list of allowable uses of proceeds and forgiveness
- Allows PPE, supplier costs, and costs related to property damage from public disturbances to be eligible costs
- Allows PPE expenses, supplier costs, and property damage costs from public disturbances to be forgiven and harmonizes 1102 and 1106 for expenses that are eligible for forgiveness.
Section 207: Streamlined documentation for sole proprietors and the self-employed
1. Allows more flexibility for the Administration to accept documentation beyond those enumerated in the CARES Act to determine eligibility for sole proprietors and the self-employed.
Section 208: Prohibition on publicly traded businesses and foreign entities
1. Excludes publicly traded entities from being eligible for PPP loans.
2. Excludes businesses that are 51 percent or more foreign owned, controlled, and managed from receiving
a PPP loan.
Section 209: Seasonal Employer flexibility period
3. Expands the seasonal period to any 12-weeks between February and December 2019, expanding beyond just the “spring” 2019 season (Feb-April) or “early summer” (March – June) in the law.
Section 210: Makes EIDL loans that got refinanced into PPP nonrecourse
1. Ensures applicants cannot be held liable if they didn’t understand they had recourse against them at the
time they took the PPP and EIDL loans after a refinancing.
Section 211: Credit elsewhere clarification
1. Clarifies that prior to enactment the current “no credit elsewhere test” remains in place; going forward for loans greater than $350,000 will apply the 7(a) credit elsewhere test.
Section 212: Prohibits duplicative payroll amounts
1. Technical correction to clarify payroll amounts
Section 213: Ensuring PPP loan requirements extend for the life of the loan
1. Clarifies that (1) fee waivers; (2) credit elsewhere waiver; (3) personal guarantee waiver; and (4) deferral eligibility continues past the covered period and attaches for the life of the PPP loan
Section 214: Preserving simple interest on loans
1. Clarifies that interest on PPP loans can only be calculated on a simple basis, not compounding.
Section 215: Timely payment of reimbursements to lenders by SBA
1. Clarifies that payment is due 5 days after the loan is “reported” disbursed.
2. Also clarifies that agent fees shall be paid by lenders only when they have a contractual relationship
with the agent.
Section 216: Eligibility for small businesses to receive both PPP and EIDL for different purposes
1. Technical correction to clarify the ability of a small business to be eligible for both PPP and EIDL loans, even beyond the enactment of the CARES Act.
Section 217: Reapplication and Modification of PPP loans
1. Provides that if a borrower returned or cancelled a loan, or did not take the full amount they were offered, this provision would allow them to either
a. In the case of a returned or cancelled loan, reapply for a new loan.
b. In the case of a reduced loan, modification to increase the loan amount.
Section 218: Treatment of Certain Criminal Convictions
1. Alleviates burdens to borrowers deemed ineligible due to prior criminal history.