CDFIs Among PPP Lenders that Get First Call in PPP Re-Opening; SBA Issue New Guidance

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As reported yesterday, the SBA will reopen the Paycheck Protection Program (PPP) next week. As a part of a call they held with trade leaders this morning, SBA and Treasury staff indicated that Community Financial Institutions (CFIs), which includes CDFIs, will be provided a brief head start for submitting loan applications, including First Draw PPP Loans on Monday, January 11, and Second Draw PPP Loans on Wednesday, January 13. SBA will accept loan applications only from CFIs for at least the first two days when the PPP loan portal re-open. 

Another change that was highlighted is that there will be a lag in approval of loans, as there will be a front-end check for compliance. Lenders should not expect approval on the day a loan is submitted. In addition, there have been updates to eligible borrowers and expenses. Applications will also not be submitted through E-Tran, as there will also be a new process and system which will be shared by SBA.

Above all, the SBA and Treasury have indicated they will be continuing to hold calls and provide necessary information, but are asking lenders for their patience as they implement the new requirements outlined in Consolidated Appropriations Act, 2021, law passed in late December. Below please find the press release issued by SBA and Treasury today, as well as links to new guidance that we shared in our bulletin yesterday. 

Press Release: SBA and Treasury Announce PPP Re-Opening; Issue New Guidance

The U.S. Small Business Administration (SBA), in consultation with the Treasury Department, announced today that the Paycheck Protection Program (PPP) will re-open the week of January 11 for new borrowers and certain existing PPP borrowers. To promote access to capital, initially only community financial institutions will be able to make First Draw PPP Loans on Monday, January 11, and Second Draw PPP Loans on Wednesday, January 13.  The PPP will open to all participating lenders shortly thereafter. Updated PPP guidance outlining Program changes to enhance its effectiveness and accessibility was released on January 6 in accordance with the Economic Aid to Hard-Hit Small Businesses, Non-Profits, and Venues Act.

This round of the PPP continues to prioritize millions of Americans employed by small businesses by authorizing up to $284 billion toward job retention and certain other expenses through March 31, 2021, and by allowing certain existing PPP borrowers to apply for a Second Draw PPP Loan.

“The historically successful Paycheck Protection Program served as an economic lifeline to millions of small businesses and their employees when they needed it most,” said Administrator Jovita Carranza.  “Today’s guidance builds on the success of the program and adapts to the changing needs of small business owners by providing targeted relief and a simpler forgiveness process to ensure their path to recovery.”

“The Paycheck Protection Program has successfully provided 5.2 million loans worth $525 billion to America’s small businesses, supporting more than 51 million jobs,” said Treasury Secretary Steven T. Mnuchin.  “This updated guidance enhances the PPP’s targeted relief to small businesses most impacted by COVID-19.  We are committed to implementing this round of PPP quickly to continue supporting American small businesses and their workers.”

Key PPP updates include:

  • PPP borrowers can set their PPP loan’s covered period to be any length between 8 and 24 weeks to best meet their 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 PPP Loan amount; and
  • Certain existing PPP borrowers are now eligible to apply for a Second Draw PPP Loan. 
  • A borrower is generally eligible for a Second Draw PPP Loan if the borrower:
  • Previously received a First Draw PPP Loan and will or has used the full amount only for authorized uses;
  • Has no more than 300 employees; and
  • Can demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020.

The new guidance released includes:

For more information on SBA’s assistance to small businesses, visit sba.gov/ppp or treasury.gov/cares. 

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