In response to the continued economic disruption of the COVID-19 pandemic, Congress passed the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act (Economic Aid Act) on December 21, 2020 as a part of the Consolidated Appropriations Act, 2021, which provides additional funding to small businesses under the Paycheck Protection Program (PPP). In the Economic Aid Act, Congress set aside funds for new and small borrowers, borrowers in low- and moderate-income communities, and community and small lenders. The Small Business Administration (SBA) issued guidance in response to a central critique of the initial PPP that various businesses were neglected, e.g., businesses with under 10 employees, businesses in economically struggling areas, and women- and minority-owned businesses, at the expense of larger and more powerful businesses. The program will allocate funds for the following purposes:
- $15 billion across first- and second-draw PPP loans for lending by community financial institutions;
- $15 billion across first- and second-draw PPP loans for lending by insured depository institutions, credit unions, and Farm Credit System institutions with consolidated assets of less than $10 billion;
- $35 billion for new first-draw PPP borrowers; and
- $15 billion and $25 billion for first-draw and second-draw PPP loans, respectively, for borrowers with a maximum of 10 employees or for loans of less than $250,000 to borrowers in low- or moderate-income neighborhoods. The SBA has determined that at least 25% of each of those set-asides will go to each one of the groups: loans to borrowers with a maximum of 10 employees and loans of less than $250,000 to borrowers in low- or moderate-income neighborhoods.
The SBA outlined in its three-page guidance that it would take several actions to promote increased access to the PPP for minority, underserved, veteran, and women-owned business concerns. Recently, The SBA announced in a news release that it will reopen the PPP on Monday, January 11 for minority- and women-owned businesses. Community financial institutions may begin processing loans to first-time PPP borrowers on Monday, January 11, and second-time borrowers on Wednesday, January 13. Loans will become available to all other lenders “shortly thereafter,” according to a news release. Through its online Lender Match tool, SBA will connect borrowers to small lenders who can assist underserved communities and the portal will set aside specific times to assist small PPP lenders. To efficiently implement the Economic Aid Act and to guarantee increased access to PPP for these communities, SBA is pursuing the following steps:
- Direct Lender Match borrower inquiries to small lenders that can aid traditionally underserved communities;
- Match small businesses through Lender Match with Certified Development Companies (CDCs), Farm Credit System lenders, microloan intermediaries, and traditional smaller asset size lenders;
- Continue setting aside dedicated hours to process and assist the smallest PPP lenders with their PPP loans;
- Continue to strongly encourage community development financial institutions and minority-, women-, veteran-, and military-owned lenders to apply to become PPP lenders. SBA said it would give full and prompt consideration to these applications to become PPP lenders consistent with program guidelines, including in cases where the lender does not meet all of the requirements listed on the updated SBA Form 3507;
- Continue to work with the Board of Governors of the Federal Reserve System on the PPP Liquidity Facility to enable PPP lenders, including nonbank lenders, to pledge PPP loans to the Federal Reserve as collateral for Federal Reserve borrowings to enhance lender liquidity and enable PPP lenders to expand their lending capacity;
- Promote awareness of these policies and procedures via traditional media methods, SBA social media accounts, and guidance to lenders before the formal opening of the SBA’s loan systems;
- Continue to work with federal partners. including the Department of Agriculture, the Federal Reserve, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Farm Credit Administration, and the National Credit Union Administration, to share the guidance with PPP lenders, borrowers, and the broader public.
Please reach out to an HHM CPAs profession for more information.
1 Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act Provides Additional Funding to Small Businesses Under the Paycheck Protection Program, JD Supra, December 22, 2020, <https://www.jdsupra.com/legalnews/economic-aid-to-hard-hit-small-46121/>
2 Hare, Neil, New Guidance Issued on Next Round of PPP Loans: An Overview For Small Businesses, Forbes, January 8, 2021, <https://www.forbes.com/sites/allbusiness/2021/01/08/new-guidance-issued-on-next-round-of-ppp-loans-an-overview-for-small-businesses/>
3 Small Business Administration, Paycheck Protection Program (PPP), Guidance on Accessing Capital for Minority, Underserved, Veteran and Women-Owned Business Concerns, https://www.sba.gov/sites/default/files/2021-01/Guidance%20on%20Accessing%20Capital%20for%20Underserved-508.pdf
4 Drew, Jeff, Date set for limited PPP reopening, Journal of Accountancy, January 8, 2020, <https://www.journalofaccountancy.com/news/2021/jan/ppp-application-reopening-date.html?utm_source=mnl:alerts&utm_medium=email&utm_campaign=08Jan2021&utm_content=button>
5 Reosti, John and Davis, Paul, More incentives for smaller lenders in next PPP round, American Banker, January 7, 2021, <https://www.americanbanker.com/news/more-incentives-for-smaller-lenders-in-next-ppp-round>
6 Drew, Jeff, New PPP Guidance Issued by SBA, Treasury, Journal of Accountancy, January 7, 2021, <https://www.journalofaccountancy.com/news/2021/jan/sba-treasury-issue-ppp2-guidance.html>