New PPP Guidance for PPP Second Draw Loans

The Journal of Accountancy has published an in-depth summary of the new PPP guidance issued by the US SBA and Treasury.  Written by senior editor Jeff Drew, the article below details the main differences between the PPP 1 and the PPP 2 along with listing eligibility, eligible costs, notes on forgiveness, maximum amounts, and set-asides for  “new and smaller borrowers, for borrowers in low- and moderate-income communities, and for community and smaller lenders”.  Please see the article below.

New PPP guidance issued by SBA, Treasury

The U.S. Small Business Administration (SBA) and Treasury issued guidance Wednesday night for the reconstituted Paycheck Protection Program (PPP).

The guidance included two interim final rules (IFRs).

  • The 82-page IFR ( “Business Loan Program Temporary Changes; Paycheck Protection Program as Amended” consolidates the rules for PPP forgivable loans for first-time borrowers and outlines changes made by the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, P.L. 116-260.
  • The 42-page IFR ( “Business Loan Program Temporary Changes; Paycheck Protection Program Second Draw Loans” lays out the guidelines for new PPP loans to businesses that previously received a PPP loan.

In addition, the SBA released a three-page ( “Guidance on Accessing Capital for Minority, Underserved, Veteran and Women-Owned Business Concerns.” That guidance includes a commitment from the SBA to make at least the first two days of the PPP application window open exclusively to applications from community financial institutions that serve minority- and women-owned businesses.

The SBA and Treasury announced Friday that the new PPP will re-open the week of Jan. 11 with community financial institutions exclusively allowed to make first-draw PPP loans on starting Jan. 11 and second-draw PPP loans starting Jan. 13. The PPP will open to all participating lenders at an unspecified date shortly thereafter and remain open through March 31.

Erik Asgeirsson, CEO of the AICPA’s business subsidiary,, said Wednesday afternoon in an AICPA Town Hall that new forms for PPP are expected to be released this week and that the SBA could start receiving applications as early as Monday. Congress revived the PPP as part of the $900 billion COVID-19 relief bill ( that was signed into law on Dec. 27. The original PPP provided $525 billion in forgivable loans ( over five months before it stopped accepting applications in August. The new PPP has $284.5 billion available, including $35 billion for first-time loans.

The Economic Aid Act rebooted the PPP with many of the same parameters as the first program but also several important differences from the original PPP.

Second-draw PPP loans

One of the biggest changes with the new PPP is that Congress made funding available to businesses that had previously received a PPP loan. Borrowers are eligible for a second-draw PPP loan of up to $2 million, provided they have:

  • 300 or fewer employees.
  • Used or will use the full amount of their first PPP loan on or before the expected date for the second PPP loan to be disbursed to the borrower. The IFR also clarifies that the borrower must have spent the full amount of the first PPP loan on eligible expenses.
  • Experienced a revenue reduction of 25% or more in all or part of 2020 compared with all or part of 2019. This is calculated by comparing gross receipts in any 2020 quarter with an applicable quarter in 2019, or, in a provision added in the IFR, a borrower that was in operation for all four quarters of 2019 can submit copies of its annual tax forms that show a reduction in annual receipts of 25% or greater in 2020 compared with 2019.

The Economic Aid Act did not provide a general definition of gross receipts for determining a borrower’s revenue reduction, so the new guidance makes the definition consistent with the definition of receipts in 13 C.F.R. Section 121.104 of SBA’s size regulations. Specifically, the IFR defines gross receipts to include all revenue in whatever form received or accrued (in accordance with the entity’s accounting method) from whatever source, including from the sales of products or services, interest, dividends, rents, royalties, fees, or commissions, reduced by returns and allowances. Forgiven first-draw PPP loans are not included in the 2020 gross receipts.

First-draw PPP loans

The Economic Aid Act makes first-draw PPP loans available to borrowers that were in operation on Feb. 15, 2020, and come from one of the following groups:

  • Businesses with 500 or fewer employees that are eligible for other SBA 7(a) loans.
  • Sole proprietors, independent contractors, and eligible self-employed individuals.
  • Not-for-profits, including churches.
  • Accommodation and food services operations (those with North American Industry Classification System (NAICS) codes starting with 72) with fewer than 500 employees per physical location.
  • Sec. 501(c)(6) business leagues, such as chambers of commerce, visitors’ bureaus, etc., and “destination marketing organizations” that have 300 or fewer employees and do not receive more than 15% of receipts from lobbying. The lobbying activities must comprise no more than 15% of the organization’s total activities and have cost no more than $1 million during the most recent tax year that ended prior to Feb. 15. 2020. Sports leagues are not eligible.
  • News organizations that are majority-owned or controlled by an NAICS code 511110 or 5151 business or not-for-profit public broadcasting entities with a trade or business under NAICS code 511110 or 5151. The size limit for this category is no more than 500 employees per location.

In a change from the original PPP, publicly traded companies and businesses controlled, either directly or indirectly, by the president, vice president, head of executive departments, and members of Congress (or their spouses as defined by applicable common law) are not eligible for PPP loans.

PPP applicants must submit documentation sufficient to establish eligibility and to demonstrate the qualifying payroll amount, which may include, as applicable, payroll records; payroll tax filings; Form 1099-MISC, Miscellaneous Income; Form 1040, Schedule C, Profit or Loss From Business, or Schedule F, Profit or Loss From Farming; income and expenses from a sole proprietorship; or bank records.

PPP loan maximum amounts

In general, first- and second-time PPP borrowers may receive a loan amount of up to 2.5 times their average monthly payroll costs (with a cap per employee of $100,000 annualized) in 2019, 2020, or the year prior to the loan. PPP borrowers with NAICS codes starting with 72 (such as hotels and restaurants) can receive up to 3.5 times their average monthly payroll costs on second-draw loans.

The maximum for a first-draw PPP loan is $10 million, the same as in the original PPP. Applicants must provide a Form 941, Employer’s Quarterly Federal Tax Return, (or other forms with similar information) and state quarterly wage unemployment insurance tax reporting forms from each quarter in 2019 or 2020 (whichever is used to calculate the loan amount), or equivalent payroll processor records, along with evidence of any retirement and health insurance contributions.

Eligible costs

PPP borrowers can have their first- and second-draw loans forgiven if the funds are used on eligible costs. As with the first round of the PPP, the costs eligible for loan forgiveness in the revised PPP include payroll, rent, covered mortgage interest, and utilities. In addition, the following costs are now eligible:

  • Covered worker protection and facility modification expenditures, including personal protective equipment, to comply with COVID-19 federal health and safety guidelines.
  • Covered property damage costs related to property damage and vandalism or looting due to public disturbances in 2020 that were not covered by insurance or other compensation.
  • Expenditures to suppliers that are essential at the time of purchase to the recipient’s current operations.
  • Covered operating expenditures, which refer to payments for any business software or cloud computing service that facilitates business operations; product or service delivery; the processing, payment, or tracking of payroll expenses; human resources; sales and billing functions; or accounting or tracking of supplies, inventory, records, and expenses.

To be eligible for full loan forgiveness, PPP borrowers will have to spend no less than 60% of the funds on payroll over a covered period between eight or 24 weeks.

Simplified forgiveness

Borrowers that receive a PPP loan of $150,000 or less shall receive forgiveness if the borrower signs and submits to the lender a certification that is not more than one page in length, includes a description of the number of employees the borrower was able to retain because of the loan, the estimated total amount of the loan spent on payroll costs, and the total loan amount. The SBA has yet to create the simplified application form but must do so by Jan. 20. The form may not require additional materials unless necessary to substantiate revenue loss requirements or satisfy relevant statutory or regulatory requirements. Borrowers are required to retain relevant records related to employment for four years and other records for three years, as the SBA may review and audit these loans to check for fraud.

Minority, underserved, veteran, and women-owned businesses

The Economic Aid Act provided set-asides for new and smaller borrowers, for borrowers in low- and moderate-income communities, and for community and smaller lenders.

The set-asides include:

  • $15 billion across first- and second-draw PPP loans for lending by community financial institutions;
  • $15 billion across first- and second-draw PPP loans for lending by insured depository institutions, credit unions, and Farm Credit System institutions with consolidated assets of less than $10 billion;
  • $35 billion for new first-draw PPP borrowers; and
  • $15 billion and $25 billion for first-draw and second-draw PPP loans, respectively, for borrowers with a maximum of 10 employees or for loans of less than $250,000 to borrowers in low- or moderate-income neighborhoods. The SBA has determined that at least 25% of each of those set-asides will go to each one of the groups: loans to borrowers with a maximum of 10 employees and loans of less than $250,000 to borrowers in low- or moderate-income neighborhoods.

The SBA announced in its three-page guidance that it would take a number of steps to ensure increased access to the PPP for minority, underserved, veteran, and women owned business concerns. Most notably, the SBA said it will accept PPP loan applications only from community financial institutions for at least the first two days when the PPP loan portal reopens. In addition, the SBA said it would:

  • Direct Lender Match borrower inquiries to small lenders that can aid traditionally underserved communities;
  • Match small businesses through Lender Match with Certified Development Companies (CDCs), Farm Credit System lenders, microloan intermediaries, and traditional smaller asset size lenders;
  • Continue setting aside dedicated hours to process and assist the smallest PPP lenders with their PPP loans;
  • Continue to strongly encourage community development financial institutions and minority-, women-, veteran-, and military-owned lenders to apply to become PPP lenders. SBA said it would give full and prompt consideration to these applications to become PPP lenders consistent with program guidelines, including in cases where the lender does not meet all of the requirements listed on the updated SBA Form 3507;
  • Continue to work with the Board of Governors of the Federal Reserve System on the PPP Liquidity Facility to enable PPP lenders, including nonbank lenders, to pledge PPP loans to the Federal Reserve as collateral for Federal Reserve borrowings to enhance lender liquidity and enable PPP lenders to expand their lending capacity;
  • Promote awareness of these policies and procedures via traditional media methods, SBA social media accounts, and guidance to lenders before the formal opening of the SBA’s loan systems; 
  • Continue to work with federal partners. including the Department of Agriculture, the Federal Reserve, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Farm Credit Administration, and the National Credit Union Administration, to share the guidance with PPP lenders, borrowers, and the broader public.

The AICPA’s Paycheck Protection Program Resources page ( houses resources and tools produced by the AICPA to help address the economic impact of the coronavirus.

For more news and reporting on the coronavirus and how CPAs can handle challenges related to the pandemic, visit the JofA’s coronavirus resources page:

( or subscribe to our email alerts ( for breaking PPP news.


Business Loan Program Temporary Changes to the PPP Second Draw Loans

The Consolidated Appropriations Act was signed into law on December 27th, 2020. This act follows the CARES Act that was signed into law last March. It aims to provide additional funding and relief to small businesses affected by the pandemic. Part of this Act includes the “Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Economic Aid Act)”, allowing a second round of loans available through the Paycheck Protection Program by adding additional funding. The current changes made to the original PPP Loan are found in Section 311, with the Small Business Administration and Treasury releasing guidance on this temporary section in early January. 

To download the SBA’s Interim Final Law Concerning Section 311 of the Economic Aid Act, please click on the button below. 

Temporary Changes to the PPP Second Draw Loans

Please note, according to the guidance, 

“Under section 311, SBA may guarantee loans under the PPP Second Draw Program through March 31, 2021 (“Second Draw PPP Loans”) to borrowers that previously received a PPP loan under section 7(a)(36) of the Small Business Act (“First Draw PPP Loans”) and have used or will use the full amount of the initial PPP loan for authorized purposes on or before the expected date of disbursement of the Second Draw PPP Loan.”

Many of the same terms, conditions, and processes applicable to the “First Draw” or first set of PPP Loans, are applicable to this Second Draw. There are however, some differences. These differences are further explained in the post “New Guidance for Second Draw PPP Loans”. Some of these differences include (but are not limited to):

  • Date effective – the rule for Second Draw PPP Loans is effective immediately;
  • Applications are open and will close March 31, 2021;
  • Eligibility: A Second Draw PPP Loan Borrower can only be eligible if they have 300 or fewer employees, experienced a reduction in revenue during 2020 relative to 2019, received a First Draw PPP Loan and has exhausted or will exhaust all the funds from that loan on authorized purposes by or before the disbursement of the Second Draw PPP Loan funds. 
  • Businesses assigned with a NAICS code beginning with 72 are eligible if they employ at most 300 employees per physical location (and meets the revenue reduction requirement among other specified requirements). 


Business Loan Program Temporary Changes to the PPP as Amended

In addition to the guidance the SBA and Treasury released concerning FSAs and Section 311 of the Economic Aid Act, both organizations have also released a guidance and Interim Final Rule regarding the changes made to the Paycheck Protection Program in order to extend the funds and amount of time allowed for small business to apply. This IRF consolidates and restates the following interim rules, stating: 

This interim final rule is intended to govern new PPP loans made under the Economic Aid Act, as well as applications for loan forgiveness on existing PPP loans where the loan forgiveness payment has not been remitted, and should not be construed to alter or affect the requirements applicable to PPP loans closed prior to its enactment. The Treasury exercises its authority under section 1109 of the CARES Act to allow borrowers of first draw PPP loans to use 2019 or 2020 to calculate their maximum loan amount.

While generally subject to the same terms and conditions as First Draw Loans, changes were made to eligibility, revenue reduction requirements, affiliations, excluded entities, payroll costs, maximum loan amount, and use of funds. 

The SBA states that 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

Additionally, the SBA states that First Draw Applicants (entities) affected by Coronavirus (COVID-19) may be eligible:

  • Sole proprietors, independent contractors, and self-employed persons
  • Any small business concern that meets SBA’s size standards (either the industry size standard or the alternative size standard)
  • Any business, 501(c)(3) non-profit organization, 501(c)(19) veterans organization, or tribal business concern (sec. 31(b)(2)(C) of the Small Business Act) with the greater of:
    • 500 employees, or
    • That meets the SBA industry size standard if more than 500
  • Any business with a NAICS code that begins with 72 (Accommodations and Food Services) that has more than one physical location and employs less than 500 per location

To download the SBA’s Interim Final Law Concerning the Amendments made to the Temporary Changes to the Second Draw PPP Loan, please click on the button below. 

Temporary Changes to the PPP Second Draw Loans as Amended


FFCRA – What Has Changed for 2021?

Please see the summary prepared by Shelagh MichaudIrene Scholl-Tatevosya, and Kimberly K. Harding of Nixon Peabody LLP regarding the Consolidated Appropriations Act and the FFCRA (Family First Coronavirus Response Act). The article from Nixon Peabody addresses the effects on extended tax credits for employers. The article also includes links to other updates the law firm has made. Please see below.

FFCRA – What Has Changed for 2021?

We highlight what employers need to know about the end of the FFCRA mandates and latest COVID-19 stimulus bill’s continuation of FFCRA tax credits as incentives to offer paid leave.

The latest COVID-19 stimulus bill — the Consolidated Appropriations Act, 2021; signed into law on December 27, 2020 and retroactive to April 1, 2020, when FFCRA became effective [1]—extends the dollar-for-dollar tax credits for employers that choose to allow employees to continue to take existing FFCRA sick leave and extended FMLA leave through March 31, 2021. The FFCRA, which requires certain employers to provide employees with up to 80 hours of paid sick leave or 12 weeks of expanded FMLA leave for specified reasons related to COVID-19, and its mandates expire on December 31, 2020. Section 286 of the new stimulus bill does not extend the FFRCA’s mandate to provide paid sick leave or expanded FMLA leave, but provides an incentive for employers to continue to allow employees to take FFCRA leave for COVID-19–related reasons through March 31, 2021. Under the new extension, employers that continue to allow employees to take FFCRA’s original 80 hours of paid sick leave and 12 weeks of expanded FMLA leave are eligible for tax credits under the same terms as FFCRA provided in 2020.

What does this mean for employers?

  • After December 31, 2020, employers are not required to continue to provide paid sick leave to employees for COVID-19–related reasons.
  • After December 31, 2020, employers are not required to continue to provide expanded FMLA leave to employees for COVID-19–related reasons.
  • Employers may choose to continue to provide 80 hours of paid sick leave for COVID-19–related reasons to eligible employees through March 31, 2021, and will be able to claim FFCRA tax credits as provided for under the FFCRA for that leave.
  • Employers may choose to continue to provide 12 weeks of expanded FMLA leave for COVID-19–related reasons to eligible employees through March 31, 2021, and will be able to claim FFCRA tax credits as provided for under the FFCRA for that leave.
  • Employees are only entitled to up to a maximum of 80 hours total paid COVID-19–related sick leave and 12 weeks total expanded FMLA leave. (The bill does not grant additional time; it only allows employees who have not exhausted their existing FFCRA paid sick leave and/or extended FMLA leave to use it until March 31, 2021, if their employers choose to continue to make the leave available.)
  • The bill does not provide any incentive (or requirement) for employers that cannot claim the tax credits, such as public entities, to continue to provide any FFCRA leave.

Considerations for employers

As with the previous requirement, this new incentive focuses on providing leave for employees who must remain out of work due to COVID-19, but also permits businesses to plan and provide for their day-to-day operations and policies. Businesses should consider the benefits of providing sick leave, including that made available through the FFCRA, during the pandemic to promote and maintain a healthy and safe work environment. Unlike passage of the FFCRA in 2020, which provided no notice or time for planning, this new bill gives businesses time to consider their options, consult with legal and tax advisors, and determine the best path forward for the business and its employees.

This summary is just part of the overlapping web of issues and legislation facing businesses as a result of the COVID-19 pandemic. In addition to extending tax credits for paid leave provided under the FFCRA, the Consolidated Appropriations Act, 2021 contained many provisions affecting employers in multiple industries. Nixon Peabody is keeping abreast of these changes and has provided the following alerts that address other provisions of the law:

Our Nixon Peabody team will continue to analyze the new law, monitor new developments and regulations as they are made available, and provide updates on other issues facing employers and solutions to assist them in navigating through these turbulent times.

  1. See our prior alerts discussing the FFCRA: “Families First Coronavirus Response Act: What employers need to know about the COVID-19 paid leave law” (March 26, 2020); “Ten most pressing questions from employers about implementing FFCRA leave” (April 07, 2020); and “Significant changes to FFCRA: DOL redefines ‘health care provider’ exception & clarifies intermittent leave for childcare purposes” (September 15, 2020). [Back to reference]

The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.