On December 27, 2020, President Trump signed the 2021 Consolidated Appropriations Act, which also contained the latest stimulus relief bill. Part of that bill was the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venue Act, which made changes to all Paycheck Protection Program (PPP) loans, re-opened the PPP program for new loans, and allowed certain borrowers to obtain a second PPP loan.
This post specifically looks at the changes implemented by the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venue Act (the “Act”) that affects new PPP borrowers. The changes previously discussed that will affect all PPP borrowers will also affect new borrowers. The changes below only affect new PPP borrowers, and do not affect existing outstanding PPP loans. The changes below are based on the text of the Act, and may be further modified or clarified by subsequent regulations or guidance.
Applications Re-Opened through March 31, 2021. The Act authorizes a renewed opportunity for eligible small businesses to apply for a PPP loan. The Act authorizes up to $259 billion in new PPP loans, although some of that money could also be utilized for second draw PPP loans. The prior authorization for new PPP loans ended on August 8, 2020. The terms of these new (first) PPP loans remain essentially the same… up to $10 million, based on monthly payroll costs, with a cap of $20 million for any affiliated corporate group. Eligibility is also generally unchanged: less than 500 employees and ability to certify that due to economic uncertainty the PPP loan is necessary.
Public Companies Ineligible. If a company has securities listed on an exchange registered with the SEC, then it is ineligible for a covered loan on or after December 27, 2020.
Expanded Non-Profit Eligibility. Section 318 of the Act slightly expands eligibility for non-profit entities to include 501(c)(6) and “destination marketing organizations.”
Bankrupt Companies May Apply. Section 320 of the Act provides that small business in bankruptcy that otherwise satisfy the eligibility criteria may apply for a PPP loan.
Elected Federal Official Conflict of Interest. Any small business that is 20% or more owned by covered federal officials (generally the President, Vice President, cabinet member or member of Congress, and their respective spouses), is ineligible for a covered loan on or after December 27, 2020.