ppp second draw issuesppp second draw issues

Per the SBA's Jan. 14, 2021, Interim Final Ruling (IFR) Protection Program (PPP) Second Draw Loans, if a first draw PPP loan has an unresolved issue, which may be due to hold codes or compliance . p.9. Paragraph 7(a)(37)(E) of the Small Business Act. corresponding official PDF file on govinfo.gov. Uses of your new Second Draw PPP Loan: The SBA has expanded the uses for a Second Draw PPP Loan, beyond the simple payment of your monthly "owner profit." However, at least 60% of the new Second Draw PPP Loan must be used to pay your owner profit each month and cannot be more than $8,333/month or $100,000/year. 7. A borrower must calculate this revenue reduction by comparing the borrower's quarterly gross receipts for one quarter in 2020 with the borrower's gross receipts for the corresponding quarter of 2019. (iv) The interest rate will be 100 basis points or one percent, calculated on a non-compounding, non-adjustable basis. 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. 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. edition of the Federal Register. A Rule by the Small Business Administration on 01/14/2021. If a borrower's First Draw PPP loan is under review by SBA and/or information in SBA's possession indicates that the borrower may have been ineligible for the First Start Printed Page 3717Draw PPP Loan it received or for the loan amount it received, the lender will receive notification from SBA when the lender submits an application for a guaranty of a Second Draw PPP Loan and will not receive an SBA loan number until the issue related to the unresolved borrower's First Draw PPP Loan is resolved. Per the SBA's Jan. 14, 2021 Interim Final Ruling (IFR) Protection Program (PPP) Second Draw Loans, if a first draw PPP loan has an unresolved issue, which may be due to hold codes or compliance . It appears to limit second draw loans to businesses that have no more than 300 employees. 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. However, it did not specify how payroll costs should be calculated for Second Draw PPP Loans to farmers and ranchers. Furthermore, the SBA has issued guidance on first draw PPP loans and on the Second Draw Loans . 5. The RFA defines a small entity as (1) a proprietary firm meeting the size standards of the Small Business Administration (SBA); (2) a nonprofit organization that is not dominant in its field; or (3) a small government Start Printed Page 3723jurisdiction with a population of less than 50,000. This article summarizes which businesses are not eligible for First Draw PPP Loans and Second Draw PPP Loans. Eligible employers can claim a tax credit equal to 50% of qualifying wages (defined as wages plus the cost of employer-provided healthcare up to $10,000 per employee) paid between March 13, 2020, and December 31, 2020. The key differences between First Draw PPP Loans and Second Draw PPP Loans are described in this IFR, which explains the loan terms, eligibility requirements, and application process for Second Draw PPP Loans. 681); and (4)(a) any business concern (including any station which broadcasts pursuant to a license granted by the Federal Communications Commission under title III of the Communications Act of 1934 (47 U.S.C. Given the number of applicants that got shut out when the program. (4) if the applicant was not in business during 2019, but was in operation on February 15, 2020, the applicant had gross receipts during the second, third, or fourth quarter of 2020 that demonstrate at least a 25 percent reduction from the gross receipts of the entity during the first quarter of 2020 (for example, an applicant that had gross receipts of $50,000 in the first quarter of 2020 and had gross receipts of $30,000 in the fourth quarter of 2020demonstrating a reduction of 40 percent from the applicant's gross receipts during the first quarter in 2020). 9. Loay Ghazaleh, a 1986 Civil Engineering graduate from Texas A & M with Global MBA - Finance from Thunderbird , Arizona is backed by near 30 years diverse experience in government and private businesses spanning many sectors in several countries.<br><br>Currently I work as the Advisor to H.E. Applicability Date: This interim final rule applies to loan applications and applications for loan forgiveness submitted for Paycheck Protection Program Second Draw Loans. 1602), including any entity that is organized for research or for engaging in advocacy in areas such as public policy or political strategy or Start Printed Page 3719otherwise describes itself as a think tank in any public documents; (i) For which an entity created in or organized under the laws of the People's Republic of China or the Special Administrative Region of Hong Kong, or that has significant operations in the People's Republic of China or the Special Administrative Region of Hong Kong, owns or holds, directly or indirectly, not less than 20 percent of the economic interest of the business concern or entity, including as equity shares or a capital or profit interest in a limited liability company or partnership; or. Although this IFR is effective immediately, comments are solicited from interested members of the public on all aspects of the interim final rule. 808(2). The Administrator, in consultation with the Secretary, determined that limiting the amount of Second Draw PPP Loans that a single corporate group may receive will promote the availability of PPP loans to the largest possible number of borrowers, consistent with the CARES and Economic Aid Act. These methodologies have been adjusted to eliminate the provision for refinancing of an EIDL loan, which does not apply to Second Draw PPP loans and to apply the choice of time period for calculating payroll costs, consistent with other Second Draw PPP loans. for better understanding how a document is structured but 04/17/2023, 209 SBA will resolve issues related to unresolved borrowers expeditiously. (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. documents in the last year, 825 The Economic Aid Act included a new payroll cost calculation for farmers and ranchers receiving First Draw PPP Loans. A borrower's average monthly payroll costs may be based on calendar year 2020, calendar year 2019,[36] They have already, or will soon, use the full amount of their first . to the courts under 44 U.S.C. 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. Second draw PPP loans are intentionally narrower and smaller in terms of eligibility and amount. (iii) No personal guarantees will be required. This clarification ensures the effectiveness of the second draw loan program by ensuring that a borrower is not disqualified from receiving a Second Draw PPP Loan because it received forgiveness on a First Draw PPP Loan. 24. Subsection (g)(2) of this IFR provides that lenders are subject to the same requirements when making Second Draw PPP Loans as when they are making First Draw PPP Loans. 636(a)(36)) apply to Second Draw PPP Loans, except as specified in this IFR.[3]. The President of the United States communicates information on holidays, commemorations, special observances, trade, and policy through Proclamations. SBA guarantees 100 percent of Second Draw PPP Loans and SBA may forgive up to the full principal loan amount. An applicant is not eligible for a Second Draw PPP Loan, even if it meets the eligibility requirements of subsection (c) of this section, if the applicant is: (1) Excluded from eligibility under the Consolidated First Draw PPP IFR;[35]. If you wish to begin preparing your application, you can download the following PPP borrower application form to see the information that will be requested from you when you apply with a lender: PPP Second Draw Borrower Application Form These include, but are not limited to the following terms: The guarantee percentage is 100 percent. ), 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. provide legal notice to the public or judicial notice to the courts. Which program provides small businesses with funds in pay up to 8 weeks of payroll costs including benefits. The bigger issue, of course, is resolving baseless loan rejections before the second round of PPP funding runs out of money. 04/17/2023, 35 and services, go to (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. If you do go back into your application and make. The interest rate will be 100 basis points or one percent, calculated on a non-compounding, non-adjustable basis. Generally, receipts are considered total income (or in the case of a sole proprietorship, independent contractor, or self-employed individual gross income) plus cost of goods sold, and excludes net capital gains or losses as these terms are defined and reported on IRS tax return forms. Document page views are updated periodically throughout the day and are cumulative counts for this document. A payroll statement or similar documentation from the pay period that covered February 15, 2020 must be provided to establish the applicant was in operation on February 15, 2020. From Jan. 11 through Jan. 24, SBA approved more than 400,000 loans for $35 billion, according to an agency report. (2) 2.5 (or, only for a borrower assigned a NAICS code beginning with 72 as defined in subsection (f)(10) at the time of disbursement, 3.5). With an additional $284 billion allocated to the PPP, the Small Business Administration has released initial guidance related to first draw and second draw PPP loans. 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. In addition, the Economic Aid Act provides that a Second Draw PPP Loan may only be made to an eligible borrower that (i) has received a First Draw PPP Loan, and (ii) has used, or will use, the full amount of the First Draw PPP Loan on or before the expected date on which the Second Draw PPP Loan is disbursed to the borrower. However, the CARES Act waived the affiliation rules for certain categories of borrowers. SBA will set aside available appropriations to fund Second Draw PPP Loans applied for by unresolved borrowers in the event they are approved. This aggregation applies for the entire period of measurement, not just the period after the affiliation arose. Comment Date: Comments must be received on or before February 16, 2021. The second draw loan program, which closes March 31, 2021, contains stricter eligibility requirements and a lower loan limit, but it retains many of the original terms and conditions of the PPP program. documents in the last year, 438 The $284 billion includes funding for businesses that already received a PPP loan under the Coronavirus Aid, Relief and Economic Security (CARES) Act (referred to as "second draw loans") and . The Administrator, in consultation with the Secretary of the Treasury (Secretary), has determined that this is necessary to improve administrability of Second Draw PPP Loans by providing borrowers an additional verifiable method for substantiating their revenue reduction. 397(11))), has a trade or business that falls under such a code; and (2) makes a good faith certification that proceeds of the loan will be used to support expenses at the component of the organization that produces or distributes locally focused or emergency information. 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. by the Internal Revenue Service 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. On December 27, 2020, President Trump signed the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (the Economic Aid Act) (Pub. FAQ #63 and subsection (c) of the interim final rule for Second Draw PPP Loans. Despite earlier moves to streamline . 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. which applies to Second Draw PPP loans. (E) Follow applicable BSA requirements (listed in subsection (C)(3)(d) of the Consolidated First Draw PPP IFR); and. (C) a warrant or right, other than a right to convert, to purchase, sell, or subscribe to a share or interest described in (A) or (B), respectively; (iii) Executive department has the meaning given the term in section 101 of title 5, United States Code; (iv) Member of Congress means a Member of the Senate or House of Representatives, a Delegate to the House of Representatives, and the Resident Commissioner from Puerto Rico; and. documents in the last year, by the Centers for Medicare & Medicaid Services Second Draw PPP Loans are generally subject to the same terms, conditions and requirements as First Draw PPP Loans. 29. (iv) The amount of any forgiven First Draw PPP Loan shall not be included toward any borrower's gross receipts. For example, a borrower with gross receipts of $50,000 in the second quarter of 2019 and gross receipts of $30,000 in the second quarter of 2020 has experienced a revenue reduction of 40 percent between the quarters, and is therefore eligible for a Second Draw PPP loan (assuming all other eligibility criteria are met). Ch.1. Subsections (c)(3) and (c)(4) of the IFR implement these statutory provisions. and all PPP loan program requirements, except as specified in this IFR. A business concern or entity primarily engaged in political activities or lobbying activities, including any entity that is organized for research or for engaging in advocacy in areas such as public policy or political strategy or that describes itself as a think tank in any public documents; certain entities organized under the laws of the People's Republic of China or the Special Administrative Region of Hong Kong, or with other specified ties to the People's Republic of China or the Special Administrative Region of Hong Kong; any person required to submit a registration statement under section 2 of the Foreign Agents Registration Act of 1938 (. An immediate effective date will give small businesses the maximum amount of time to apply for loans and lenders the maximum amount of time to process applications before the program ends. And Second Draw PPP Loans applied for by unresolved borrowers expeditiously application and make the program full principal amount! 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