February 3, 2023


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Small Business Owners Get More PPP Relief, Expanded Loan Options

As small business owners continue fighting to survive and recover from the Covid-19 pandemic, they can enter the New Year with renewed hope and much-needed assistance, now that the president has signed the latest Covid-19 economic relief package into law.

The legislation includes key provisions related to the Small Business Administration’s Paycheck Protection Program and signature 7(a) loan. While we wait for the agency to issue governing regulations—it must do so within 10 business days from the enactment, or by January 6, 2021—the changes are worth noting, especially if you own a business or plan to advise clients on matters related to the relief package.

Here are four key areas in the bill that affect borrowers:

1. Eligible Borrowers Can Obtain A Second PPP Loan

The Paycheck Protection Program was designed primarily to help business owners retain their employees. Under the new law, PPP borrowers are eligible for an additional loan (a second draw) if they meet certain criteria. To qualify, businesses must employ 300 people or fewer. They must have used or will use the full amount of their first PPP loan. And they must demonstrate a minimum 25{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} reduction in gross receipts during any one quarter in 2020 from the same quarter in 2019.

Those who are eligible may apply for up to 2.5 times the borrower’s average monthly payroll during 2019 or no more than $2 million—whichever is less. The maximum amount is significantly less than the first round of the PPP, which allowed borrowers up to $10 million.

Hard-hit businesses—those in the accommodations and food services industries—may qualify for second draw loans of up to 3.5 times their average monthly payroll costs, which equates to 140{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of their original PPP loan.

2. PPP Loan Forgiveness Rules Remain Intact

The forgiveness rules and processes are generally the same for second-draw loans as they were for the original PPP loans. Borrowers can have their loan forgiven in its entirety if they use the funds to pay for eligible costs during the applicable covered period (any time frame between eight and 24 weeks from loan disbursement).

To qualify for full forgiveness, at least 60{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of the loan funds must be spent on payroll costs. The rest may be used for business mortgage interest payments, rent, utilities or other new eligible expenses such as certain operations expenses, supplier costs and worker protection expenditures. More information is expected soon on the additional eligible expenses.

Once the loan proceeds have been exhausted, borrowers can apply for forgiveness within 10 months of receiving the loan. Detailed documentation of PPP-related spending is critical for borrowers to earn maximum loan forgiveness. Acceptable documentation includes paid checks, payroll documentation, receipts and billing statements. As indicated below, some borrowers will not be required to submit supporting documentation with the forgiveness application, but must keep those documents in case of subsequent review by SBA.

3. The PPP Loan Forgiveness Application Is Simplified

The Small Business Administration has 24 days from the legislation’s enactment to develop forms and instructions for a one-page forgiveness application for loans under $150,000. Borrowers must sign and submit the form and include critical details such as the number of employees retained, the estimated amount spent on payroll and the total loan amount. Borrowers must attest to the accuracy of the certification and that they complied with PPP requirements. Supporting documentation will not be required with the simplified forgiveness application, but must be retained for 4 years for possible future review by SBA.

4. Enhancements To 7(a) Loans

The SBA’s 7(a) loan is designed to help small businesses thrive. Under the CARES Act, the SBA covered six months of payments on all loans existing as of March 27, 2020, and any new loans issued prior to Sept. 27, 2020. Under the new law, these borrowers will receive an additional 3 months of payments from SBA, beginning in February 2021.  Borrowers who take out new loans before October 1, 2021 will receive the first six months of principal and interest payments from SBA.  All payments provided for in the new stimulus law will be capped at $9,000 a month

To help owners navigate the pandemic, the agency covered six months of payments on all existing loans and any new ones issued before September 27, 2020. Under the new law, relief will continue to be available to new borrowers who take out loans within six months, as the SBA will cover the first six months of principal and interest payments (capped at $9,000 a month) through September 2021. Starting in February 2021, existing borrowers receive three months of waived principal and interest payments, up to $9,000 per month.


New provisions to the 7(a) loan program include a guaranty increase to 90{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}, up from 75{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}. Borrowers will get three months of principal and interest payments on existing 7(a) loans, capped at $9,000 per month, starting in February 2021. And there will be an additional five months of payments for existing borrowers in industries hit hardest by the pandemic.

The law also provides for an additional five months of payments for existing borrowers (as of 12/27/20) in industries hit hardest by the pandemic. These impacted industries include :

  • Educational services

  • Arts and entertainment

  • Accommodation and food services

  • Mining and logging

  • Apparel

  • Clothing

  • Sporting goods, hobby companies, music stores

  • Air transportation

  • Ground transportation

  • Sightseeing

  • Publishing industries

  • Motion picture and sound recording

  • Broadcasting

  • Rental and leasing

  • Personal and laundry services

Small businesses are key to our nation’s path to economic recovery, and we need entrepreneurs to strengthen the backbone of our economy. Through the new Covid-19 relief bill, the SBA’s loan programs can continue to provide the financial relief that small business owners need to help them recover and, ultimately, thrive.

Mark Schmidt is CEO of Fund-Ex Solutions Group, an SBA Preferred Lender and one of only 14 non-bank lending companies licensed by the SBA to offer 7(a) loans and the Paycheck Protection Program. Visit fundexsolutions.com for more information.

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