On Wednesday, February 24, the U.S. Treasury Department’s Small Business Administration (SBA) announced new rules for distribution of funds under the Paycheck Protection Program (PPP), a key pandemic relief program under the CARES Act, in order to target the smallest of small businesses. Until Tuesday, March 9, 2021 at 5pm ET, the end of a two-week period, the SBA will not accept new applications from lenders for businesses and nonprofits with 20 or more employees, so that lenders can focus on serving smaller companies.
Once the exclusivity period ends, lenders will be able to submit PPP loan applications for all eligible businesses and nonprofits again.
The change is an attempt to direct more funding toward the mom-and-pop businesses that may have had trouble accessing PPP loans in prior funding rounds because they may have lacked connections to larger banks.
One recent change to the program opened the lender pool to non-bank community partners, which tend to serve lower-income and minority communities. While the program was initially limited to payroll expenses, the new PPP funding extends to a range of new expenses including operations expenditures, property damage costs, supplier costs, and worker protection expenditures.
The SBA confirmed that applications already submitted by lenders before the start of the exclusivity period will still be processed by the agency. The agency will also consider a second PPP loan for some first-time recipients. Eligibility for a “second-draw†PPP loan is limited to businesses with fewer than 300 employees. Businesses receiving second-draw loans must have experienced a 25 percent or more reduction in revenue in 2020 compared to 2019. (This calculation does not include loan forgiveness.)
The third round of PPP funding expires on March 31, with no current plans to replenish funds after that date. Your trusted REDW tax advisors have assisted dozens of small businesses in preparing the financial information required for a PPP loan application and in calculating loan forgiveness after businesses receive their loans.
Contact Tax Senior Manager Craig Neumann at 602.730.3645 or Craig.Neumann@REDW.com for more information about PPP loan services and other COVID-19-related relief programs.
REDW is committed to keeping you informed at all times, and especially through the impacts of the COVID-19 pandemic. Stay connected with us on LinkedIn and @REDWLLC on Twitter. Access some of our other updates on our COVID-19 Resource Hub.
