The U.S. Small Business Administration this week issued new rules and guidance for the second round of Paycheck Protection Program funding approved by Congress last month.

The SBA published two final rules—one addressing first draw PPP loans and the other for second draw PPP loans—that reflect the federal Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act.

The first draw PPP interim final rule includes regulatory provisions and guidance on borrower eligibility, lender eligibility, and loan application and origination requirement issues for new First Draw loans.

The PPP second draw loan interim final rule covers eligibility and terms and conditions for the additional $284 billion in PPP loan funds authorized by the Economic Aid Act.

The legislation authorizes second draw PPP loans for eligible borrowers that received first round loans and "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."

The agency is also encouraging eligible small business interested in accessing new PPP loans to reach out to their lender as soon as possible. 

Only community financial institutions will be initially able to make first draw PPP loans on Monday, Jan. 11, and second draw loans from Wednesday, Jan. 13.

Key Provisions

Key PPP updates include:

  • PPP borrowers can set their loan’s covered period to be any length between eight and 24 weeks to best meet business needs
  • PPP loans will cover additional expenses, including operations expenditures, property damage costs, supplier costs, and worker protection expenditures
  • The program’s eligibility is expanded to include 501(c)(6)s, housing cooperatives, direct marketing organizations, among other types of organizations;
  • The PPP provides greater flexibility for seasonal employees
  • Certain existing PPP borrowers can request to modify their first draw loan amount
  • Certain existing PPP borrowers are now eligible to apply for a second draw loan

Eligibility

A business is generally eligible for a second PPP loan if it:

  • Previously received a first draw loan and will or has used the full amount only for authorized uses
  • Has no more than 300 employees
  • Can demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020

The SBA also released specific guidance covering PPP loan issues for minority, underserved, and veteran and women-owned businesses.