The SBA continues to issue guidance and resources to help businesses navigate the agency’s Paycheck Protection Program (PPP) and other COVID-19 relief. This week alone, the SBA has provided the following updates:
Guidance on Gross Receipts and Payroll Costs
A new PPP Q&A focuses on how to calculate revenue reduction and maximum loan amounts for second draw PPP loans. The guidance confirms much of what we already surmised about the definition of gross receipts for nonprofit and for-profit PPP borrowers, the exclusion of PPP funds from gross receipt calculations, and the methodologies for calculating payroll costs to determine maximum loan size.
The guidance also outlines the specific documentation requirements for first draw and second draw loans above and below $150,000, as well as specific payroll cost calculation methodologies for nonprofit organizations, self-employed borrowers, partnerships and LLCs.
Guidance on Loan Forgiveness
The SBA issued a new interim final rule (IFR) that reiterates loan forgiveness requirements under the CARES Act and updates forgiveness procedures under the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act (Economic Aid Act). Highlights of the new IFR include
- For second draw PPP loans in excess of $150,000, the borrower must submit the loan forgiveness application for the first draw loan before or simultaneously with the loan forgiveness application for the second draw loan, even if the calculated amount of forgiveness on the first draw loan is zero.
- The covered periods for first draw and second draw PPP loans cannot overlap.
- A second draw borrower must certify on its loan forgiveness application that it used all first draw amounts on eligible expenses prior to disbursement of the second draw loan.
New Loan Forgiveness Applications
The SBA also issued updated versions of its three loan forgiveness applications:
- Form 3508 for PPP borrowers of more than $150,000
- Form 3508S for borrowers of $150,000 or less
- Form 3508EZ for self-employed borrowers with no employees; borrowers who did not reduce wages by more than 25 percent and did not reduce employee hours; and borrowers who did not reduce hours by more than 25 percent and were unable to operate at the same level of business activity as before February 15, 2020
New Disclosure Form for Controlling Interests
The SBA issued a new required form, Borrower’s Disclosure of Certain Controlling Interests, for certain PPP borrowers that received first draw loans before December 27, 2020.
As required under the Economic Aid Act, this form will allow borrowers to disclose if a covered individual directly or indirectly held a controlling interest in the borrower at the time the PPP loan application was submitted to the lender. Covered individuals include the President and Vice President of the U.S., members of Congress, heads of executive departments, or the spouse of any such U.S. government official.
Extended Relief for Borrowers of Non-PPP SBA Loans
In a new procedural notice, the SBA announced it will extend its coverage of payments missed by borrowers of non-PPP 7(a) loans, 504 loans and microloans. Originally issued as a 6-month reprieve under the CARES Act, this benefit was extended under the Economic Aid Act. The length of payment coverage depends on the type of loan and when it was issued.
Grassi’s Emergency Loan Consulting team will continue to keep you updated as new guidance is released from the SBA. If you have any questions, please contact your Grassi advisor or our Crisis Response & Recovery hotline at 212.223.6216 or response@grassiadvisors.com.
