The Small Business Administration (SBA) has begun issuing regulations to carry out the changes to the Paycheck Protection Program (PPP) effected by passage of the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Economic Aid Act) that was included as part of the Consolidated Appropriations Act 2021 (CAA21) (which we discussed in this article) by releasing two interim final rules (IFRs). First, is an IFR that mainly restates three-fourths of the 25 previously published IFRs (which explains the 82-page length of the IFR). Second, is an IFR about second PPP loans. With these IFRs, the SBA has divided PPP loans into two categories: the first PPP loan received by borrowers (First Draw PPP Loans) and a second PPP loan allowed to PPP borrowers that qualify (Second Draw PPP Loans).
The current PPP loan rules resulted from 25 IFRs issued by the SBA between April 2 and June 25, 2020. The SBA has now consolidated, with some changes, 19 of these IFRs into a single IFR.1 The changes made by the SBA in restating these rules include:
For Second Draw PPP Loans, the SBA confirmed that the rules applicable to First Draw PPP Loans generally apply. This overlap of operating rules should help streamline Second Draw PPP Loans and ensure that any business that received a First Draw PPP Loan can receive a Second Draw PPP Loan if the business satisfies (1) the drop in revenue requirement and (2) the not more than 300 employees requirement. Items discussed in the IFR for Second Draw PPP Loans include:
Congress generally intended to provide quick relief to businesses that received First Draw PPP Loans that (1) have no more than 300 employees and (2) experienced a drop in gross receipts of at least 25 percent. The Second Draw PPP Loan IFR issued by the SBA generally accomplishes this objective
1 The SBA did not restate the 14th, 15th, 20th, 23rd, 24th or 25th IFRs.
2 The SBA restated its prior rule allowing partnerships to increase First Draw PPP Loans to include partner compensation.
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