On Feb. 22, the Small Business Administration (SBA) issued new guidance and rules related to the Paycheck Protection Program (PPP) that include important changes.
Beginning at 9:00 a.m. EST on Feb. 24 through 5:00 p.m. EST on March 9, the SBA will not process any PPP loans for an entity that employs more than 20 people. During this 14-day period (Exclusivity Period), the SBA hopes to strengthen the equitable distribution of PPP funds. However, for many businesses this will be a two-week delay in obtaining a PPP loan, unless the business has already (a) provided its PPP loan application to its bank, and (b) the bank submitted the application into the SBA’s system prior to the morning of Feb. 24. If an entity misses this deadline and has over 20 employees, the SBA will automatically reject the loan application during the Exclusivity Period.
The employee count is per individual employee and does not take into account full-time equivalent (FTE) calculations. Therefore, seasonal, part-time, and full-time employees all count as an “employee” no matter the number of hours worked. The PPP loan program expires on March 31, 2021.
Some additional and notable PPP changes include:
- Borrowers that file a Schedule C now have a revised formula. Schedule C filers are able to calculate PPP loan amounts using gross income (line 7), instead of net income (line 31). Also, $1 billion has been set aside for Schedule C filers with no employees that are located in a low-to-moderate income (LMI) census tract (click here to determine if the location qualifies as an LMI census tract).
- The student loan debt delinquency restriction has been eliminated for entities having 20% or more owners who have a student loan debt delinquency.
- Entities with owners that have non-fraud felonies may now apply for a PPP loan without any time restrictions.
- Entity owners that only have a tax identification number from the IRS are eligible for a PPP loan.
Taft will continue to provide updates as the SBA releases additional information related to these items. For further information, please contact any member of Taft’s SBA Task Force.
Please visit our COVID-19 Toolkit for all of Taft’s updates on the coronavirus.