Reed Smith Client Alerts

On January 8, 2021, the U.S. Small Business Administration (“SBA”) and the U.S Department of the Treasury (“Treasury”) announced the re-opening of the Paycheck Protection Program (“PPP” or the “Program”), with many applications submitted in the first week and anticipation of high demand. The reopening of the PPP follows the signing into law of the Consolidated Appropriations Act 2021 (the “Act”) by the President on December 27, 2020. The Act modifies the program, which expired on August 8, 2020, extending the PPP until March 31, 2021 and creating new funding for the PPP of up to $284.45 billion in PPP loans, including a newly created second draw program (“PPPSD”). While the extended program will operate in substantially the same way, certain modifications have been made. Key modifications are summarized below.

Changes to the eligibility of borrowers: Generally the eligibility criteria of the initial program remain consistent, but certain businesses have been added including:

  • Certain news organizations.
  • Destination marketing organizations that meet certain requirements.
  • Housing cooperatives with fewer than 300 employees.
  • 501(c)(6) organizations with fewer than 300 employees provided that:
  • the organization derives no more than 15 percent of its receipts from lobbying activities;
  • lobbying activities comprise no more than 15 percent of the organization’s total activities; and
  • the cost of lobbying activities did not exceed $1 million during the most recent tax year that ended prior to February 15, 2020.

Newly ineligible entities include public companies and persons that received a grant for shuttered venue operators under the Act.

Changes to selection of covered period: Borrowers can now select a covered period that ends on any date between 8 and 24 weeks after disbursement of a PPP loan.

Changes to interest rate: The new legislation now provides for an interest rate of 100 basis points (1 percent) calculated on a non-compounding, non-adjusting basis. This change only applies to PPP loans made on or after December 27, 2020 and is only retroactive to loans made prior upon agreement between the borrower and lender.