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The Small Business Administration, in consultation with the U.S. Treasury Department, has reopened loans under the Paycheck Protection Program (PPP) for First Draw PPP Loans effective the week of January 11, 2021. These First Draw PPP Loans will be available first to participating community financial institutions (CFIs), including Community Development Financial Institutions (CDFIs), Minority Depository Institutions (MDIs), Certified Development Companies (CDCs), and Microloan Intermediaries. The First Draw PPP Loan program will be expanded to include all other participating lenders at a future date to be announced.
A high-level summary of the First Draw PPP Loan provided by the SBA is as follows:
PAYCHECK PROTECTION PROGRAM FIRST DRAW LOANS
SBA is reopening the Paycheck Protection Program (PPP) for First Draw Loans the week of
January 11, 2021. First Draw PPP Loans can be used to help fund payroll costs, including
benefits. Funds can also be used to pay for mortgage interest, rent, utilities, worker protection costs related to COVID-19, uninsured property damage costs caused by looting or vandalism during 2020, and certain supplier costs and expenses for operations.
Full Forgiveness Terms
First Draw PPP Loans made to eligible borrowers qualify for full loan forgiveness if during the 8- to 24-week covered period following loan disbursement:
• Employee and compensation levels are maintained;
• The loan proceeds are spent on payroll costs and other eligible expenses; and
• At least 60 percent of the proceeds are spent on payroll costs.
Who Can Apply
Eligible small entities, that together with their affiliates (if applicable), have 500 or fewer
employees—including nonprofits, veterans organizations, tribal concerns, self-employed
individuals, sole proprietorships, and independent contractors—can apply. Entities with more than 500 employees in certain industries that meet SBA’s alternative size standard or SBA’s size standards for those particular industries can also apply.1
Reapplying and Loan Increases
Existing PPP borrowers that did not receive loan forgiveness by December 27, 2020 may: (1) reapply for a First Draw PPP Loan if they previously returned some or all of their First Draw PPP Loan funds, or
(2) under certain circumstances, request to modify their First Draw PPP Loan amount if they previously did not accept the full amount for which they are eligible.
How and When to Apply
Borrowers can apply for a First Draw PPP Loan until March 31, 2021, through any existing
SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, eligible non-bank lender, or Farm Credit System institution that is participating in PPP. All new First Draw PPP Loans will have the same terms regardless of lender or borrower. A list of participating lenders can be found on the SBA's website.
Ensuring Access for All
SBA continues to call upon its lending partners, including Community Development Financial Institutions (CDFIs) and Minority Depository Institutions (MDIs), to redouble their efforts to assist eligible borrowers in underserved and disadvantaged communities. At least $15 billion is being set aside for First Draw PPP loans to eligible borrowers with a maximum of 10 employees or for loans of $250,000 or less to eligible borrowers in low- or moderate-income neighborhoods. To promote access for smaller lenders and their customers, SBA will initially only accept loan applications from community financial institutions starting on January 11, 2021. The PPP will open to all participating lenders shortly thereafter.
(1) Also eligible to apply for First Draw PPP Loans are businesses with a NAICS Code that begins with 72 (Accommodation and Food Services sector) or eligible news organizations with no more than 500 employees per physical location, as well as housing
cooperatives, 501(c)(6) organizations, or destination marketing organizations with no more than 300 employees.
The application for a First Draw PPP Loan is found here.
Please contact your HCVT professional about any questions you may have about the First Draw PPP Loan Program.