Updated as of 3/18/2021

Small Business Assistance in the American Rescue Plan Act

In addition to a wide range of assistance for individuals and other entities, there are several provisions of the American Rescue Plan Act aimed at helping small businesses.  These include:

  • Another $7.25 billion for the PPP, along with expanded eligibility for nonprofit organizations, as well as digital new services that provide local news and public health guidance.  However, as of this date, the program will end on March 31st, so it is not known how much of the additional funds will help the intended end users
  • $10 billion to help states assist small business economies, distributed via the State Small Business Credit Initiative, to help leverage private capital and make low-interest loans to help small businesses
  • $15 billion more funds for the EIDL grants program for those in underserved areas, especially those that are minority owned
  • $28.6 billion to create a grant program for restaurants and bars under the Restaurant Revitalization Fund (RRF)
  • Another $15 billion for the SVOG program, and a change to the grant program that would allow applicants to also seek PPP loans
  • $1.325 billion to help fund additional operating costs for the SBA to oversee these new programs

As more details are made available, they will be posted on this site.

More Changes to the PPP Loan Program as of 3/4/2021

Courtesy of Mike Austin, Access to Capital Counselor

Small Business Development Center of Hampton Roads, Inc.

While the PPP program continues to be an efficient and effective manner in providing assistance to the region’s small business owners, it has been noted that there are some shortcomings that need to be addressed.

Recently, the Administration announced several additional changes to the current round of PPP funding.  The goal of these changes is to provide greater access to capital to applicants that have been historically disenfranchised.  This includes the following:

  • Sole Proprietors/Self-Employed: under existing rules, these classes of businesses were required to use Line 31, form 1040, Schedule C (a/k/a “net income”) to calculate the loan amount, which in many instances significantly reduced the amount eligible for funding.  Under the revised rule, these classes of business can use “gross income” line 7 for this calculation
  • An additional $1 billion of the PPP program funds are being designated for these business categories located in low-to-moderate (LMI) areas
  • Support for “Second Chance” business owners, which means business owners with felony records that are not linked to fraud will now be eligible for funding
  • Business owners that are delinquent on federal student loans will be eligible for PPP funding
  • Businesses owned by non-citizens who are lawful US residents (those with VISAs or Green Cards) are now eligible for funding, which means they can use their Individual Taxpayer Identification Numbers (ITINs)

One point to remember is that this program “sunsets” on 31 March, 2021 unless extended by Congress.

Those individuals who are eligible for the revised PPP Loan Program should speak with their local financial institution both to obtain specific information on the latest changes, but also to be prepared to submit their application as expeditiously as possible in order to meet the deadline for this program.

PPP-Updated-FAQs-3-3-21Download

Federal COVID Relief Bill

Congress passed landmark relief legislation on December 21, 2020 and the President signed it on December 27th. The Treasury and SBA have put together implementing guidelines and the lending community will re-establish their lending portals for the Paycheck Protection Program. The information below is our best understanding of the relief legislation and will be updated as more details are available:

Webinars for More Information

Restaurant Revitalization Fund Update – Thursday March 18th from 2pm-3pm

Applying for Covid-19 Funding under PPP and EIDL – Friday March 19th from 10am-11am

What Employers Should Consider During COVID-19 – Wednesday March 24th from 12pm-1pm

Recorded webinars:

Small Business Update – American Rescue Plan Act

Shuttered Venue Operators Grant (SVOG) Overview

PPP2 – New Borrowers

PPP2 – Existing Borrowers

PPP2 Updates from SBA – Link to Recorded Series

COVID-19 Relief Legislation details are worth following closely, and we’re encouraging business owners to:

  1. Sign up for webinars – we have links for upcoming programs and for recordings of past programs above
  2. Contact your banker
  3. Consult with your accountant
  4. Keep checking this Alexandria SBDC webpage for updated information

New Paycheck Protection Program (PPP) Loans based on the Economic Aid Act of 2020

Although much attention has been given to the ability of existing PPP applicants to obtain a 2nd loan, for many clients in underserved markets who were unable to obtain first round funding, the rules that apply to the revised “First Draw” program merit noting (many of these guidelines also apply to “Second Draw” credits). President Biden has also announced additional program changes to make access to PPP loans more equitable. $35 billion has been set aside for these applicants, and the guidelines include:

  • Borrowers must be able to certify that the loan was “necessary”.  The SBA has stated that they will not require proof for loans under $150,000, but other agencies (IRS etc.) may do so.  Also, a list of all recipients will be made public (which could create social media issues)
  • $15 billion has been set aside for borrowers with no more than 10 employees or loans of $250,000 or less to entities located in low-to-moderate-income neighborhoods
  • The maximum available for “First Draw” borrowers is $10 million and the maximum single location number of employees remains at 500
  • The maximum amount of loans for seasonal employers, new entities, and businesses with more than 1 physical location
  • Eligibility Entities has been expanded, and now includes the following:
    • Any business entity
    • Independent contractor
    • Self-employed individual
    • Sole proprietor
    • Non-profit
    • Veterans’ organizations
    • Tribal businesses
    • Housing cooperatives
    • Small agricultural cooperative
    • Eligible 501 c(6) entities (must have 300 or fewer employees, lobbying must not exceed 15% of receipts or activities, with total budgets of $1 million or less)
    • Eligible nonprofit new organizations
    • Destination marketing organizations
  • Seasonal employer definition has been re-worked and now is an entity that operates more than 7 months or earned no more than 1/3rd of its revenue in any 6 months in the prior calendar year.  Furthermore, they can calculate PPP amounts based on the average monthly payroll costs for a 12-week period selected by the borrower that began 2/15/19 or 3/1/19, and ended 6/30/19, or they can elect to use any consecutive 12-week period beginning after 2/14/2020 and ending before 1/1/21, multiplied by 2.5X, not exceeding $2 million
  • New entities can qualify based on the average monthly payroll costs up through the date when they apply, multiplied by 2.5, not to exceed $2 million
  • The eligible use of proceeds has been expanded to include:
    • Payroll costs:
      • Group life insurance
      • Group disability insurance
      • Group vision insurance
      • Group dental insurance
      • Tip income can now be included
    • Non-payroll costs:
      • Business software or cloud computing
      • Costs incurred due to social unrest not covered by insurance
      • Supplier costs
      • PPE and other expenses mandated by federal, state, or local health agency requirements
  • Farmers and ranchers can now use gross income for either 2019 or 2020 instead of net income
  • The list of ineligible businesses has been expanded to include:
    • Entities that have permanently closed
    • Businesses not in operation on 2/15/2020
    • Publicly traded companies
    • Lobbying organizations
    • Hedge funds or private equity firms
    • Entities organized in the People’s Republic of China
    • Entities registered under the Foreign Agents Registration Act
    • Executive Branch leaders and members of Congress and spouses with 20%+ ownership
    • Household employers
    • Entities in bankruptcy
  • Provisions also include new applications for borrowers that have returned/repaid all their original PPP loan prior to applying for the new credit

It merits noting that further clarification of these guidelines are likely given that with the first round of funding there were 30 updates issued along with 26 pages of FAQs. The new Administration anticipates additional changes during the final month of this round of PPP funding.  Interestingly, to date the SBA has not published documentation on these changes, but it is anticipated that their guidance, including date-certain information, will be forthcoming soon.

SBA Guidelines for PPP2 Loans (a/k/a “Second Draw” Loans)

Late 1/6/21 the SBA released its long-anticipated guidelines for borrowers interested in obtaining a second PPP loan.  These new guidelines in many instances replicate those issued for the first round of PPP lending that expired on August 8, 2020.  However, based on Congressional mandates included in the new legislation (a/k/a the Economic Aid Act, or EAA), some of earlier guidance was re-written with the intent of providing more funding for businesses and other entities that were unable to obtain funding in earlier funding rounds.  Specifics include:

Eligibility:

  • Applicant cannot have more than 300 employees in a single location
  • Borrowers must be able to certify that the loan is “necessary” to ensure their continued survival
  • Must have experienced a 25% or greater reduction in gross revenues between 2019 and the same period in 2020
  • Borrowers must have either used all of their first PPP or will use all first PPP loan before the 2nd loan is disbursed
  • The borrower must calculate the revenue reduction by comparing the borrower’s quarterly gross receipts for 2020 and the same period in 2019
  • Alternatively, borrowers can use their annual receipts for 2019 and 2020 to show a 25% reduction
  • If applicant entity was not in business during the 1st or 2nd quarter of 2019 but was in operation during quarters 3 and 4 in 2019, must demonstrate a 25% reduction in gross revenues in any quarter of 2020 would be eligible
  • If applicant was in operation for only quarter #4 of 2019 and could show a corresponding reduction of 25% or more in any quarter of 2020 then they would be eligible
  • Borrowers should not include proceeds from the first PPP loan in their gross revenues for 2020
  • Business entities with NAICS code starting with “72” can have up to 500 employees per location
  • Business entities under this category can qualify for more than 1 PPP2 loan if each location has a separate EIN
  • The affiliation rules for the first round of PPP loans apply for PPP2 loans
  • Independent contractors, sole proprietors, non-profit organizations, veterans’ organizations, tribal business concerns, housing cooperatives, small agricultural cooperatives, eligible nonprofit news organizations, eligible 501c(6) organizations, and destination marketing organizations

Ineligible Entities:

  • Lobbying firms
  • Firms organized in The People’s Republic of China or Hong Kong
  • Individuals that register under the Foreign Agents Registration Act
  • Those that receive grants under Section 324 of the EAA
  • Firms associated with the President, Vice President, head of an Executive Department, or member of Congress, or the spouse of any of these that hold a 20%+ interest in the entity
  • Any publicly traded company
  • Entities in bankruptcy

Terms and Conditions

  • The general terms and conditions are the same as the first round of PPP funding, including:
    • No collateral or personal guarantees
    • Any resulting loan will be repayable over 5 years at 1% interest
    • 2.5 months of eligible expenses, except for NAICS 72 borrowers (Food Service and Accommodations businesses) which can receive 3.5 months of these same expenses
  • The use of proceeds remains at 60% for payroll and 40% for other eligible expenses, with an expanded use of eligible expenses, including:
    • Payroll costs now include group life, disability, vision, and dental insurance (employer portion)
    • PPE costs that were incurred in response to national, state, or local health mandates
    • Cloud computing costs
    • Costs related to property damage due to public disturbances in 2020 that were not covered by insurance
    • Supplier costs that were essential to the survival of the borrower
  • The maximum loan amount is $2 million, except for multi-location corporations, for which the cap is $4 million
  • The program expires March 31, 2021, unless extended by Congress or other action

Application Requirements:

  • SBA guidelines are designed to mirror those for the first round of PPP funding.  However, lender requirements may differ
  • No additional documentation to substantiate payroll costs will be required if:
    • Applicant used calendar year 2019 figures to determine its First Draw PPP Loan amount
    • They used calendar year 2019 figures to determine its Second Draw PPP Loan amount instead of calendar year 2020
    • The Lender for the applicant’s Second Draw PPP Loan is the same as the lender that made the applicant’s First Draw PPP Loan
  • Loans greater than $150,000, the applicant must also submit documentation adequate to establish that the applicant experienced a revenue reduction of 25% or greater in 2020 vs. 2019
    • Documents may include tax forms
    • Annual tax forms
    • Quarterly financial statements or bank statements
  • Loans $150,000 or less, this documentation is not required at time of application, but must be provided in conjunction with submission of the forgiveness application
  • A new application form has been created (2483-SD), a/k/a Paycheck Protection Program Second Draw Borrower Application Form, or the Lender’s equivalent form
  • Applicants will be required to certify that they:
    • Will not seek a 2nd PPP2 loan
    • Gross revenues declined by at least 25% for the same period(s) year over year
    • That all proceeds from the first PPP loan had been used or will be used before the 2nd loan is advanced
    • Are not an entity organized under the laws of the People’s Republic of China or Hong Kong
    • Are not registered under the Foreign Agents Registration Act
    • Are not lobbying or political organization

Forgiveness:

  • Same process as for PPP1 loans, with the same timeline of 10 months after the funds are used
  • If the amount of the PPP2 loan was $150,000 or less, if applicant did not do so at time of approval, they must provide documentation of gross revenue reductions of at least 25% at time of applying for forgiveness

These guidelines are subject to revision at any time by the SBA.  Given that the first round of PPP funding generated 30 separate updates and 26 pages of FAQs, it is likely that there will be clarifying updates for some of the more technical aspects of the program.  In addition, most of the revised guidance is retroactive to the start of the program in early 2020, which means that for many borrowers, seeking an increase in their first PPP loan may be more advantageous than trying to obtain a 2nd loan. Furthermore, it is not currently known how the lending community will enact these changes.

Recommended Actions to Prepare for PPP Portals

  • Determine if you are eligible, especially for those seeking a 2nd advance, for those rules are more restrictive.  In addition, applicants are required to certify/prove that they need the funding; that the loan is “necessary” for them to continue to operate
  • Run the numbers, to determine the amount you may be able to seek, based on the revised guidelines issued 1/6/21.  Some entities will benefit more than others
  • Revisit your PPP forgiveness application, if you received funds in the first round, to be sure that you have properly documented how the funds were used based on the revised use of proceeds
  • Recalculate business expense deductions, based on the revised rules
  • Call your lender, if you anticipate either seeking a 2nd loan or want to revisit the amount received from your first loan.  Under the revised rules, many firms may find it advantageous to seek an increase in their first loan vs. seeking a 2nd round of funding.  However, it is not known if lenders will create a portal for increasing existing PPP debt or require their borrowers to seek a 2nd loan.  In addition, if your lender has determined they will not participate, seek out other finance avenues, include online “fintech” lenders

EIDL First Advance and PPP Forgiveness

As you are aware, under the original PPP program, if a borrower also received an EIDL “first advance”, the amount of that advance would be deducted from the amount of PPP forgiveness.  The recently enacted Economic Aid Act made modifications to this provision, including:

  • The amount of the EIDL advance will no longer be deducted from the amount of PPP debt forgiven
  • This change is retroactive, which means that for any PPP debts already forgiven for the amount reduced by the EIDL advance the SBA will reimburse lenders for all principal and accrued interest, which will in turn, pay off the amount owed by borrowers

This too is good news for borrowers, including those that already applied for PPP forgiveness.

Miscellaneous Changes to SBA Programs and Tax Policy

The recent Economic Aid Act, which became law late last month, included a plethora of changes to existing SBA and other programs that will benefit small businesses.  These include the following:

  • The Employee Retention Tax Credit was expanded in the following ways:
    • The program was extended through June 30
    • The decline in gross receipts has been decreased from 50% to 20%
    • The tax credit, originally 50% of up to $10,000 in qualified wages (approximately $5,000 per employee) has been increased to 70% ow qualified wages, or up to $10,000 per quarter
    • The employee size of companies has been increased from 100 to 500
    • Businesses can now claim the tax credit and a PPP loan
  • SBA loan debt relief extension:
    • New and existing 7(a), 504, and microloans will receive an additional 3 months of principal and interest relief, capped at $9,000 per borrower per month, starting in February
    • Businesses in hard-hit industries will receive an additional 5 months of relief
    • The SBA will also cover the principal and interest payments on new loans approved between February 1st and September 30th, also capped at $9,000/month
  • SBA guarantees:
    • SBA guarantees will increase to 90% and will waive borrower and lender fees on 7(a) and 504 loans

There are likely additional provisions that will translate into more benefits to small businesses.

Participating Lenders

Participating lenders include regional and community banks, credit unions, fintechs, community development financial institutions (CDFIs), and minority depository institutions (MDIs). We will list any such participating lenders that we are able to identify.

Community Banks

While there are likely others, our preliminary information is that the following local banks intend to participate in the PPP2 program:

  • Burke & Herbert
  • M&T
  • TD
  • Wells Fargo
  • Atlantic Union
  • Truist (BB&T)

Nonbank Lenders Accepting PPP Loan Applications

  • BlueVine (1st and 2nd Draw)
  • Centerstone SBA Lending (1st and 2nd Draw)
  • Fountainhead (1st and 2nd Draw)
  • Harvest Small Business Finance (1st and 2nd Draw, with focus on applicants that have been overlooked by larger lenders)
  • Kabbage (via K.Servicing.com) 2nd Draw only for existing 1st Draw clients
  • Newtek (1st and 2nd Draw)
  • Ready Capital (partnered with Lendio to provide 1st and 2nd Draw)
  • Square Capital (will open portal soon, but only for existing customers)
  • The Loan Source (portal is not open yet, and is a group of nonbank lenders)
  • Biz2Credit (1st and 2nd Draw – will send to SBA lenders, and applicants must have a Biz2Credit account)
  • Brex (will forward applications to SBA lenders)
  • Community Reinvestment Fund, USA (a CDFI, 1st and 2nd Draw)
  • Divvy (will forward requests to Lendio and Cross River Bank)
  • Fundera (online marketplace that will forward loans to SBA lenders)
  • Funding Circle (online marketplace that connects investors and borrowers.  They are accepting 1st and 2nd Draw applications to forward to one of their partner lenders)
  • Kaptitus (working in partnership with Cross River Bank as a conduit)
  • NAV (online marketplace that has partnered with multiple SBA lenders to process PPP 1st and 2nd Draw requests)
  • PayPal Holdings (via LoanBuilder.com with WebBank as the lender)
  • SmartBizLoans (online marketplace that will submit 1st or 2nd draw loans to one of their partner banks)
  • Womply (they are a loan agent, but will assist with preparing the loan request for 1st or 2nd draw credits that they will forward to one of several partner banks)

Changes to EIDL Program

There were also several notable changes to the EIDL program that merit noting.  These include:

  • Under earlier versions of the PPP loan, if a borrower also received an EIDL first advance, then the amount of the first advance would be deducted from the amount of PPP forgiven, which would, therefore, result in many borrowers ending up with a small-balance PPP loan.  The new legislation reversed this requirement so that entities that received both an EIDL first advance and a PPP loan will no longer have the EIDL amount deducted from the amount of PPP debt forgiven
  • EIDL first advances will no longer be considered taxable income

These changes are good news for a lot of small businesses and other eligible entities.  However, these changes will require the SBA to create a process by which borrowers and lenders have already processed their forgiveness applications.  Also, some borrowers have also repaid their residual PPP balances, and these will need to be addressed as well.  To date, fully 21% of small businesses have applied for partial forgiveness, primarily because they also received EIDL first advances.  This could result in hundreds of thousands of small businesses receiving full PPP forgiveness, based on both loans already forgiven as well as those that will apply for loans under the new round of PPP funding.  This information could be helpful to SBDC clients in the coming months as they sort thru existing PPP debts as well as their seeking funding from the new round of PPP.

OTHER SUGGESTIONS FOR WHAT CAN YOU DO NOW

  1. Be ready to act quickly once the application process is announced.
  2. Keep track of your financial records by quarters for 2020 and how they compare to 2019. You’re going to have to show at least a 25% drop in gross revenues.
  3. Contact your bank or other potential lenders (local banks, community lending institutions, credit unions) to ask whether they are going to participate in the next round of PPP lending.
  4. If you don’t already have a banking relationship (business banking account and bank branch contact), it’s time to get one or search other options such as credit unions, CDFIs, fintechs and minority depository institutions (MDIs).

Shuttered Venue Operators Grant

One of the more interesting parts of the recent small business relief act was the inclusion of subject program, which sets aside $15 billion for entertainment venues that were forced to close during the pandemic.  Many of the provisions are similar to those found in the PPP loan program; but this is a grant fund with no repayment being required.  The SBA continues to roll-out updates on the Shuttered Venue Grants (SVOG) program, which is still not available to applicants.

SVOG-FAQ-3-12-2021Download
SVOG-Eligibility-Requirements-v2Download
SVOG-Application-ChecklistDownload

Shuttered Venue Operators Grant (SVOG) Overview – 3/17/21 Recorded Webinar

Based on this guidance, the terms and conditions of the grant are as follows:

  • Applicants must have been in operation as of 2/29/2020
  • Venues in operation on 1/1/19 are eligible for grants equal to 45% of their 2019 gross revenues, up to $10 million
  • Venues that opened after 1/1/19 the grants will be fore the average monthly gross revenue for each full month in operation in 2019 X 6, up to $10 million
  • There will be a priority ranking system in place:

First Priority: 1st 14 days of grant awards, for entities that suffered a 90% or greater revenue loss between April 2020 through December 2020 due to the COVID pandemic

Second Priority: 2nd 14 days of grant awards, for entities that suffered a 70% or greater loss of revenues during this same period

Third Priority: beginning 28 days after 1st and 2nd priority awards are made

Supplemental Funding: after 1st and 2nd priority groups are funded, for any 1st or 2nd round funding recipients that suffered at least a 70% revenue loss for the most recent calendar quarter (as of 4/1/21 or later)

Grantee Recordkeeping:

Grantees will be required to maintain documentation demonstrating their compliance with eligibility and other requirements of the SVO grant program.  Employment records must be maintained for 4 years following receipt of the grant, and all other records must be maintained for 3 years.

Eligibility: All Applicants:

  1. “Eligible entity” includes a wide range of venue operators, promoters, theatrical producers, live performing arts organization operators, museum operators, motion picture theater operators, and talent representatives
  2. Applicants must have been in operation on 2/29/2020
  3. If an entity was not in business during 2019 but was fully operational on 2/29/2020 it is eligible if it can show the required level of revenue loss.  The SBA will apply different analysis criteria in such situations; namely, firms not operating in 2019 may qualify for a SVOG if their gross earned revenues for the 2nd, 3rd, or 4th quarter of 2020 demonstrate a reduction of at least 25% from their gross earned revenues from the 1st quarter of 2020
  4. Eligible entities must have fixed seating.  Temporary seating venues are not eligible
  5. Venues can be indoor or outdoor
  6. Mobile entities with no fixed performance space are not eligible for a SVOG, nor are drive-in movie theaters, for they do not have fixed seating

Disqualifying criteria include:

  • Applicant does not operate primarily in the US
  • Not in operation on 2/29/2020
  • Is a publicly traded corporation or is majority owned and controlled by a publicly traded company
  • Provides either live performances or sells products or services of a prurient sexual nature
  • More than 10% of its 2019 revenues came from the federal government (excluding disaster assistance)
  • The applicant that has locations in more than 1 country, operates venues in more than 10 states, and has more than 500 employees as of 2/29/2020

Application:

To get ready for the application process the following is recommended:

  1. Register for a DUNS number so applicants can register in the System for Award Management (SAM.gov)
  2. Gather documents that demonstrate the number of employees and monthly revenues to determine average number of employees over prior 12 months.  Also, determine the extent of gross revenues earned and amount of loss between 2019 and 2020.  Floor plans, contract copies, and other supporting documentation will be required to apply for a SVOG
  3. SVOG applicants must register in SAMS.  Other forms of taxpayer identification are not acceptable (individual EIN, business EIN, etc.)

Note: the program is still not in operation.  These guidelines are subject to change or modification prior to or after the funding portal opens.  However, these are the general terms and conditions that are proposed to be in effect when funding becomes available.

Additional Guidance & Resources

Top-line Overview of PPP First Draw Loans

Top-line Overview of PPP Second Draw Loans