On January 6, 2021, the Small Business Administration (SBA) issued its first round of formal guidance for the new Paycheck Protection Program (PPP) and the second-draw PPP loans, which we first discussed here. SBA also gave some indication of plans for the second round of the PPP. SBA’s guidance can be found here for the next phase of PPP and here for the second-draw program. Below are key updates for businesses that need access to this important source of relief funding.
As most of you know, there was a major backlash against the original PPP for funding large companies or companies who were well connected and not as in need of relief. SBA wants the initial focus of the next round of PPP loans to be squarely on very small businesses or businesses owned by people of color, women, and veterans who, largely, were left out of the initial scramble for PPP funding last April. The new guidance serves to address those criticisms.
Specifically, SBA has noted that it plans on only accepting applications from community financial institutions for a few days when the new portal opens. This should ensure that those organizations, which traditionally assist communities who are underserved (or not served at all) by traditional banking institutions, have access to the funding.
Additionally, SBA plans to set money aside for certain types of organizations instead of opening the full amount up on a first come, first served basis. To that end, $15B will be set aside for community development financial institutions; $15B for banks and credit unions with under $10B in assets; and $40B for businesses with fewer than ten employees. This is for both first- and second-draw PPP loans. The idea is to allow these organizations to have the first opportunity to access the funds, so they are not used up by larger businesses. It should also ensure that the set-aside funding will still remain for assistance, even when large businesses are able to apply.
As to the specific details outlined in the guidance, SBA noted the following.