Eligibility, conditions and upcoming deadlines for new PPP loans under the latest federal stimulus package – Employment and HR


United States: New PPP loan eligibility requirements, requirements and deadlines to come as part of the latest federal stimulus package

The most recent federal emergency legislation expands eligibility for small business loans and provides for a maturity extension to May 31, 2021, giving small businesses time to act.

It is critical that business owners keep abreast of their rights and potential benefits amid the seemingly endless deluge of laws responding to the past year of economic crisis. A recently updated initiative is the Federal Paycheque Protection Program (“P3”). The PPP includes a loan, backed by the US Small Business Administration (“SBA”), to encourage small businesses to keep their employees on the payroll despite business difficulties.

The eligibility requirements for PPP loans to small businesses and nonprofits, under the recent American Rescue Plan Act of 2021 (“ARPA”), are essentially the same as those under the former Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”)). Under ARPA (and the CARES Act), most small businesses or nonprofits are potentially eligible for a PPP loan if the organization employs 500 or fewer employees. However, some entities could benefit from high employee limits set by the SBA for certain industries. For example, companies in the “crude oil extraction” market can qualify with up to 1,250 employees. Bridge payday has since released their discounted prices on same day loans

ARPA also provides that small businesses or nonprofits with more than one physical location are eligible to receive a PPP loan if they do not employ more than 500 employees.
by physical location. This is a significant extension of PPP eligibility that creates a new class of potential beneficiaries.

However, being eligible for the PPP loan does not necessarily mean that a company will have that loan completely canceled under the program. PPP First Draw loans to eligible borrowers are only eligible for loan cancellation if during the applicable covered period following loan disbursement (8 to 24 weeks): (1) employee and compensation levels are maintained; (2) at least 60 percent of revenue is spent on salary costs; and (3) the remaining loan proceeds are spent on staff costs or other “eligible expenses”. These “qualifying expenses” include, but are not limited to, salary, wages, commission or similar compensation; payment of a tip in cash or equivalent; or the payment of vacation, parental, family, medical or sick leave. Failure to comply with these and similar requirements, as well as the registration instructions accompanying the PPP loan itself, will present the risk that part or all of a company’s PPP loan will not be canceled.

The Continued Assistance Act (“CAA”), ARPA and subsequent IRS guidelines dispelled some previous ambiguities regarding the interaction between PPP and Employee Retention Credit (“ERC”). The ERC is a refundable payroll credit for skilled salaries paid by employers who have been injured by the coronavirus but have retained their employees. Prior to the adoption of the CAA in December, an employer whose 2020 PPP loan had been canceled was then prevented from claiming an ERC. However, under CAA and ARPA, companies are now eligible for ERC even if they previously received PPP funding and loan forgiveness, as long as the payroll and expenses identified for the ERC were not paid using PPP funds.

Even if your business has already obtained a PPP loan discount, you may be eligible for a PPP Second Draw loan. Applicants for the second draw are eligible if (1) have already received a PPP first draw loan and have or have used the full amount only for authorized uses; (2) have no more than 300 employees; and (3) can demonstrate a reduction of at least 25 percent in gross revenue between comparable quarters in 2019 and 2020. The same requirements listed above for first-draw PPP loan cancellation also apply to the second drawdown PPP loan cancellation.

The original deadline to apply for PPP loans under ARPA was March 31, 2021. However, the PPP Extensions Act was passed by Congress and the President signed it on March 30, 2021, extending the deadline for applying for PPP loans at May 31, 2021.

To get started, small businesses and nonprofits can go to the SBA website and start their PPP process:

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought on your particular situation.

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