Paycheck Protection Program First & Second Draw Loans – Updated Rules

• Was in operation on February 15, 2020¹
• Small business concern under the applicable revenue-based size standard established by SBA
• C-Corp, S-Corp, LLC or Partnership
• Independent contractor, self-employed individual, or sole proprietor
• 501(c)(3) non-profit, 501(c)(19) veterans’ organization, or 501(c)(6) organization²
• Tribal business concern described in section 31(b)(2)(C) of the Small Business Act
• A news organization that is majority owned or controlled by a NAICS code 511110 or 5151 business or a nonprofit public broadcasting entity with a trade or business under NAICS code 511110 or 5151 ²
• Eligible entities (that meet other eligibility requirements) include hospitals owned by government entities, businesses that receive revenue from legal gaming, electric, telephone and housing cooperatives, and destination marketing organizations ³
• SBA affiliation (common ownership or common management) rules apply, but there are exceptions – see below

• Has no more than 500⁴ employees

• Any business concern that has more than one physical location and that employs not more than 500 employees per physical location is eligible if it is assigned a NAICS code beginning with 72⁵

• Any business concern, or any station which broadcasts pursuant to a license granted by FCC, that has more than one physical location and that employs not more than 500 employees per physical location is eligible if (i) it is majority owned or controlled by a business concern that is assigned a NAICS code beginning with 511110 or 5151 and (ii) it makes a good faith certification that proceeds of the loan will be used to support expenses at the component of the organization that produces or distributes locally focused or emergency information

• Has no more than 300⁴ employees except:

• Any business concern that has more than one physical location and that employs not more than 300 employees per physical location is eligible if it is assigned a NAICS code beginning with 72

• Any business concern, or any station which broadcasts pursuant to a license granted by FCC, that has more than one physical location and that employs not more than 300 employees per physical location is eligible if (i) it is majority owned or controlled by a business concern that is assigned a NAICS code beginning with 511110 or 5151 and (ii) it makes a good faith certification that proceeds of the loan will be used to support expenses at the component of the organization that produces or distributes locally focused or emergency information

• Previously received a First Draw PPP loan
• Has used, or will use, the full amount of its First Draw PPP Loan (including the amount of any increase on such loan)
• Had gross receipts during the first, second, third, or fourth quarter in 2020 that demonstrate at least a 25% reduction from the applicant’s gross receipts during the same quarter in 2019⁶

• Gross receipts 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
• The amount of any forgiven First Draw PPP Loan shall not be included toward any borrower’s gross receipts
• Also excludes net capital gains or losses, taxes collected for and remitted to a taxing authority if included in gross or total income (such as sales or other taxes collected from customers); proceeds from transactions between a concern and its domestic or foreign affiliates; and amounts collected for another by a travel agent, real estate agent, advertising agent, conference management service provider, freight forwarder or customs broker
• May not exclude subcontractor costs, reimbursements for purchases a contractor makes at a customer’s request, investment income, and employee-based costs such as payroll taxes
• Gross receipts of a borrower with affiliates is calculated by adding the gross receipts of the business concern with the gross receipts of each affiliate

• Business concern, with not more than 500 employees, that, is assigned a NAICS code beginning with 72
• Business concern operating as a franchise that is assigned a franchise identifier code by the SBA
• Business concern that receives financial assistance from an SBIC
• Business concern (including any station which broadcasts pursuant to a license granted by the FCC) that employs not more than 500 employees per physical location and is majority owned or controlled by a business concern that is assigned a NAICS code beginning with 511110 or 5151
• Nonprofit organization that is assigned a NAICS code beginning with 5151
• Faith based organizations
• Employee Stock Ownership Plans (ESOPs)

• Business concern with not more than 300 employees that is assigned a NAICS code beginning with 72
• Business concern (including any station which broadcasts pursuant to a license granted by the FCC) that employs not more than 300 employees, per physical location of such business concern and is majority owned or controlled by a business concern that is assigned a NAICS code beginning with 511110 or 5151

• Was not in operation on February 15, 20201¹
• Publicly traded, i.e., an issuer of securities listed on an exchange registered as a national securities exchange under section 6 of the Securities Exchange Act of 1934
• Applicant or the owner of the applicant is the debtor in a bankruptcy proceeding
• Engaged in any activity that is illegal under Federal, state, or local law
• Is a household employer (i.e. individuals who employ household employees such as nannies or housekeepers)
• Businesses that are generally ineligible for 7(a) loans under 13 CFR 120.110 (except for businesses described in paragraphs (a), (g), and (k))
• Has an owner, of 20% or more of the equity of the applicant, who is a felon
• Is owned, or controlled, by owners, who have, within the last seven years, defaulted, or are currently delinquent, on a loan from the SBA or any other Federal agency
• Has received or will receive a grant under the Shuttered Venue Operator Grant program under section 324 of the Economic Aid Act
• Is an entity in which the President, the Vice President, the head of an Executive Department, or a Member of Congress, or the spouse of such person as determined under applicable common law, directly or indirectly holds a controlling interest in the business

• Has previously received a Second Draw PPP Loan
• Is permanently closed
• Is primarily engaged in political activities or lobbying activities, as defined in section 3 of the Lobbying Disclosure Act of 1995
• Has 20% or more economic interest in an entity created in, or organized under, the laws of the People’s Republic of China or the Special Administrative Region of Hong Kong, or that has significant operations in the People’s Republic of China or Hong Kong
• Retains, as a member of the board of directors of the business concern, a person who is a resident of the People’s Republic of China
• Is any person required to submit a registration statement under section 2 of the Foreign Agents Registration Act of 1938

1. Aggregate payroll costs from 2019 or 2020 for employees whose principal place of residence is the United States
2. Subtract any compensation paid to an employee in excess of $100,000, on an annualized basis, as prorated for the period during which the payments are made or the obligation to make the payments is incurred
3. Calculate average monthly payroll costs (divide the amount from Step 2 by 12)
4. Multiply the average monthly payroll costs from Step 3 by 2.5

Loan calculations for Second Draw Loans are the same as First Draw Loans except:

• For borrower assigned a NAICS code beginning with 72, multiply the average monthly payroll costs by 3.5

Alternative period:

• For a seasonal employer use the average total monthly payments for payroll costs incurred or paid in any 12-week period between February 15, 2019 and February 15, 2020
• For a borrower that did not exist during the 1-year period preceding February 15, 2020, but was in operation on February 15, 2020, the loan amount is the product obtained by multiplying (i) the quotient obtained by dividing (a) the sum of the total monthly payments by the borrower for payroll costs paid or incurred by the borrower as of the date on which the borrower applies for the Second Draw PPP Loan; by (b) the number of months in which those payroll costs were paid or incurred (ii) by 2.5;

Alternative payroll costs:

• For partnerships, compute 2019 or 2020 payroll (using the same year for all items) by adding (i) net earnings from self-employment of individual general partners in 2019 or 2020, as reported on IRS Form 1065 K-1, reduced by section 179 expense deduction claimed, unreimbursed partnership expenses claimed, and depletion claimed on oil and gas properties, multiplied by 0.9235,57 that is not more than $100,000 per partner; (ii) 2019 or 2020 gross wages and tips paid to your employees whose principal place of residence is in the United States, if any, which can be computed using 2019 or 2020 IRS Form 941 Taxable Medicare wages and tips (line 5c-column 1) from each quarter plus any pre-tax employee contributions for health insurance or other fringe benefits excluded from Taxable Medicare wages and tips, subtracting any amounts paid to any individual employee in excess of $100,000 and any amounts paid to any employee whose principal place of residence is outside the U.S; (iii) 2019 or 2020 employer contributions for employee group health, life, disability, vision and dental insurance, if any (portion of IRS Form 1065 line 19 attributable to those contributions); (iv) 2019 or 2020 employer contributions to employee retirement plans, if any (IRS Form 1065 line 18); and (v) 2019 or 2020 employer state and local taxes assessed on employee compensation, primarily state unemployment insurance tax (from state quarterly wage reporting forms), if any
• For sole proprietors/independent contractors/self-employed, with no employees, use net profit reported on Schedule C of IRS Form 1040 (with a maximum of $100,000) for payroll costs
• For farmers, with no employees, use the gross income of 2019 or 2020 shown on Schedule F of IRS Form 1040 (with a maximum of $100,000) for payroll costs

Payroll includes:

• Compensation to employees (salary, wage, commission, or similar compensation, cash tip or equivalent)
• Payment for vacation, parental, family, medical, or sick leave
• Allowance for dismissal or separation
• Payment for the provision of employee benefits consisting of group health care or group life, disability, vision, or dental insurance, including insurance premiums
• Retirement benefits
• State or local tax assessed on the compensation of employees

Payroll excludes:

• Any compensation of an employee whose principal place of residence is outside of the US
• The compensation of an individual employee in excess of $100,000 on an annualized basis, as prorated for the period during which the payments are made, or the obligation to make the payments is incurred
• Federal employment taxes imposed or withheld during the applicable period, including the employee’s and employer’s share of FICA (Federal Insurance Contributions Act) and Railroad Retirement Act taxes, and income taxes required to be withheld from employees
• Qualified sick and family leave for which a credit is allowed under sections 7001 and 7003 of the Families First Coronavirus Response Act

• The maximum loan amount is $10 million
• Businesses that are part of a single corporate group⁸ shall in no event receive more than $20,000,000 of PPP loans in the aggregate

• The maximum loan amount is $2 million
• Businesses that are part of a single corporate group shall in no event receive more than $4,000,000 of Second Draw PPP Loans in the aggregate

• Any time between 8 weeks and 24 weeks beginning on the date the lender disburses the PPP
• The SBA has eliminated the ‘alternative covered period’

• If a partnership received a PPP loan that only included amounts necessary for payroll costs of the partnership’s employees and other eligible operating expenses, but did not include any amount for partner compensation, the borrower may request an increase in the PPP loan amount to include appropriate partner compensation (up to $100,000 per partner on an annualized basis), even if the loan has been fully disbursed and even if the lender’s first SBA Form 1502 report to SBA on the PPP loan has already been submitted. In no event can the increased loan amount exceed the maximum loan amount allowed under the PPP Program, which is $10 million for an individual borrower or $20 million for a corporate group
• The following borrowers can also reapply or request an increase in their PPP loan amount:

(a) Seasonal employer that received a PPP loan before December 27, 2020 (with the revised calculation)
(b) A borrower that returned all of a PPP loan may reapply for a PPP loan in an amount the borrower is eligible for under current PPP rules
(c) A borrower that returned part of a PPP loan may reapply for an amount equal to the difference between the amount retained and the amount previously approved
(d) A borrower that did not accept the full amount of a PPP loan for which it was approved, may request an increase in the amount of the PPP loan up to the amount previously approved

• Payroll Costs (as defined above)⁹. At least 60 percent of the PPP loan proceeds shall be used for payroll costs ¹⁰
• Costs related to the continuation of group health care, life, disability, vision, or dental benefits during periods of paid sick, medical, or family leave, and group health care, life, disability, vision, or dental insurance premiums
• Mortgage interest payments (but not mortgage prepayments or principal payments)
• Rent payments
• Utility payments
• Interest payments (but not principal) on any other debt obligations that were incurred before February 15, 2020
• Refinancing an SBA EIDL loan made between January 31, 2020 and April 3, 2020
• Covered operations expenditures (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
• Covered property damage costs (costs related to property damage and vandalism or looting due to public disturbances that occurred during 2020 that was not covered by insurance or other compensation)
• Covered supplier costs (expenditures made by a borrower to a supplier of goods for the supply of goods that—(a) are essential to the operations of the borrower at the time at which the expenditure is made; and (b) is made pursuant to a contract, order, or purchase order—(i) in effect at any time before the covered period with respect to the applicable covered loan; or (ii) with respect to perishable goods, in effect before or at any time during the covered period with respect to the applicable covered loan
• Covered worker protection expenditures Operating or a capital expenditures to facilitate the adaptation of the business activities of an entity to comply with requirements established or guidance issued by the HHS, CDC or OSHA, or any equivalent requirements established or guidance issued by a State or local government, during the period beginning on March 1, 2020 and ending the date on which the national emergency with respect to the COVID–19 expires related to the maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID–19.
  Such expenditures may include:

  (i) the purchase, maintenance, or renovation of assets that create or expand:

  (a) a drive-through window facility
  (b) an indoor, outdoor, or combined air or air pressure ventilation or filtration system
  (c) a physical barrier such as a sneeze guard
  (d) an expansion of additional indoor, outdoor, or combined business space
  (e) an onsite or offsite health screening capability
  (f) other assets relating to the compliance with the requirements or guidance of the SBA

  (ii) the purchase of:

  (a) covered materials described in section 328.103(a) of title 44, Code of Federal Regulations, or any successor regulation
  (b) particulate filtering facepiece respirators approved by the National Institute for Occupational Safety and Health, including those approved only for emergency use authorization; or
  (c) other kinds of personal protective equipment, as determined by the SBA

  Such expenditures do not include residential real property or intangible property

• Current economic uncertainty makes this loan request necessary to support the ongoing operations of the applicant
• Information provided in this application and the information provided in all supporting documents and forms is true and accurate in all material respects. I understand that knowingly making a false statement to obtain a guaranteed loan from SBA is punishable under the law, including under 18 U.S.C. 1001 and 3571 by imprisonment of not more than five years and/or a fine of up to $250,000; under 15 U.S.C. 645 by imprisonment of not more than two years and/or a fine of not more than $5,000; and, if submitted to a federally insured institution, under 18 U.S.C. 1014 by imprisonment of not more than thirty years and/or a fine of not more than $1,000,000

• 1% calculated on a non- compounding, non-adjustable basis (for the unforgiven portion of the loan)

• 5 years (for the unforgiven portion of the loan)

• If you submit to your lender a loan forgiveness application within 10 months after the end of your Covered Period, you will not have to make any payments of principal or interest on your loan before the date on which SBA remits the loan forgiveness amount on your loan to your lender (or notifies your lender that no loan forgiveness is allowed)
• If you do not submit to your lender a loan forgiveness application within 10 months after the end of your Covered Period, you must begin paying principal and interest after that period

• No