2nd PPP this Monday: Guidance, Webinar, and Important Updates

Small business owner

The U.S. Small Business Administration (SBA) will restart the Paycheck Protection Program (PPP) this Monday. Lenders targeting underserved communities will have exclusive access to offer loans to new borrowers Monday and Tuesday. They will then be able to offer second loans to existing borrowers on Wednesday. Then PPP will open widely a few days later.

The types of lenders having early access to PPP next week are Community Development Financial Institutions (CDFI), minority depository institutions, certified development companies, and microlender intermediaries (see more information below in the “2nd Round of PPP” section).

Although SBA and the Treasury Department are giving PPP lenders and borrowers time to digest the rules before launching next week, they have not released application forms and lenders still don't know how the new SBA technology will work.

SBA & Treasury’s Interim Final Rules/Guidance for 2nd Round PPP
The SBA and Treasury Department’s interim final rules (IFR) and guidance for the PPP as amended through the Consolidated Appropriations Act of 2021 (which became law on Dec. 27, 2020) is as follows:

Business Loan Program Temporary Changes; Paycheck Protection Program as Amended by Economic Aid Act (Consolidated First Draw PPP IFR): Restates existing regulatory provisions to provide lenders and new PPP borrowers a single regulation to consult on borrower eligibility, lender eligibility, and loan application and origination requirements issued for new first-draw PPP loans, as well as general rules relating to first-draw PPP loan increases and loan forgiveness.

Business Loan Program Temporary Changes; Paycheck Protection Program Second Draw Loans (Second Draw PPP IFR): Provides guidance regarding the loan terms, eligibility requirements, and application process for second-draw PPP loans. Generally, second-draw PPP loans are subject to the same terms, conditions and requirements as first-draw PPP loans. However, the eligibility requirements for second-draw PPP loans under the Consolidated Appropriations Act of 2021 are narrower than PPP loans under the CARES Act.

Accordingly, borrowers for a second-draw PPP loan will only be eligible if: 1) A business has 300 or fewer employees and experienced a revenue reduction in 2020 relative to 2019; 2) The borrower has received a first-draw PPP loan and used, or will use, the full amount of the first-draw PPP loan on or before the expected date on which the second-draw PPP loan is disbursed to the borrower; 3) The borrower is able to demonstrate at least a 25 percent reduction in gross receipts in the first, second, or third quarter of 2020 relative to the same 2019 quarter.

Additionally, the SBA released guidance that discusses a number of steps the agency will take to ensure increased access to PPP for minority, underserved, veteran, and women-owned businesses. When this new PPP is open for both new borrowers and certain existing PPP borrowers next week, initially only community financial institutions will be able to make first-draw PPP loans on Jan. 11 and Jan. 12, and then second draw PPP loans on Jan. 13. The PPP will then open to all participating lenders shortly thereafter and remain open through March 31.

Jan. 11 Webinar: SBA and Treasury to Answer PPP Questions
You can join SBA and Treasury Department officials for an overview of the new PPP features associated with the recently passed Economic Aid to Hard Hit Small Businesses, Non-Profits, and Venues Act. This “Ask the Regulators” webinar will take place on Jan. 11 at 11 a.m. (Pacific) and is hosted by the National Credit Union Administration (NCUA) and other federal financial regulatory agencies. You can register here.

It will provide a timeline for the rollout of new PPP programs, an official overview of the PPP loan programs (including first and second-draw loans), and discuss new forms and guidance. A brief question-and-answer session will follow the presentation. Participants are encouraged to email questions in advance to asktheregulators@stls.frb.org.

Firms Taking Advantage of PPP Situation
The California and Nevada Credit Union Leagues are hearing about third-party companies that are trying to take advantage of the situation surrounding the latest federal Paycheck Protection Program (PPP) by offering to fill out loan/grant applications for an upfront fee on behalf of small business credit union members, plus a percentage of the PPP funds.

The Leagues want to remind credit unions that there is no fee to apply for a federal PPP loan. If a member mentions that he or she is dealing with a company to obtain a PPP loan or grant, or get a PPP loan forgiven, please remind them it is unnecessary (and likely a scam).

Additionally, specifically in California, there is no fee charged by the state to apply for the California Small Business COVID-19 Relief Grant Program (state program).

$25 Billion Emergency Rental Assistance Program Announced
The Treasury Department has launched a new $25 billion Emergency Rental Assistance Program (ERAP) established by the Consolidated Appropriations Act of 2021. The ERAP assists households that are unable to pay rent and utilities due to the economic impact by the COVID-19 pandemic. The funds are provided to for state, county, and municipal governments with populations of more than 200,000 people. Eligible grantees must use the funds to provide assistance to eligible households through existing or newly created rental assistance programs.

An “eligible household” is defined as a renter household that has a household income at or below 80 percent of the area’s median income and in which at least one or more individuals living in the household: 1) Qualifies for unemployment or has experienced a reduction in household income, incurred significant costs, or experienced a financial hardship due to COVID-19; Can demonstrate a risk of experiencing homelessness or housing instability.

Funds generally expire on Dec. 31, 2021. Additional details for governments and renters regarding the ERAP can be found here.

Stimulus Protected from Setoff, Garnishment, and Levy
President Donald Trump signed into law the Consolidated Appropriations Act of 2021 on Dec. 27, 2020, which includes $900 billion in economic relief in response to the COVID-19 pandemic. The new act consists of provisions for a second round of one-time economic impact payments (EIPs) of $600 for individuals and $1,200 for joint filers, in addition to $600 per qualifying child.

The Internal Revenue Service (IRS) and the Treasury Department have begun delivering the second round of EIPs, with initial direct deposit payments made available as of Jan. 4. The Treasury Department has noted that EIP checks mailed out beginning on Dec. 30, 2020 have a pay date of Jan. 6.

Unlike the first round of EIPs under the CARES Act, the second round of EIPs made via automated clearing house (ACH) will be coded with a company name “IRS TREAS 310” and an identifier “XXTAXEIP2.” Moreover, the act states these new EIP payments are not subject to administrative setoff for past-due federal or state debts and are protected from bank garnishment or levy by private creditors or debt collectors. Accordingly, credit unions should refer to the Treasury’s "Green Book" for additional information on the processing of Treasury payments that are exempt.

As a reminder, in April 2020, California Gov. Gavin Newsom issued Executive Order N-57-20, which exempts CARES Act stimulus funds and any other federal, state or local government financial assistance in response to the COVID-19 pandemic received by individuals from garnishment. The order also states that no financial institution shall have any lien upon, or any right of setoff, against CARES Act stimulus funds, and that consumers entitled to these funds do not have to take any action. Credit unions should note that the order has not been revoked and remains in effect; thus, it would apply to this second round of EIP funds. Click here for frequently asked questions (FAQs) regarding this executive order.

For more information about EIPs, please visit IRS.gov/EIP.

The Latest on Stimulus Bill and Government Funding Bill
As reported on the Leagues’ Advocacy Blog over the past few weeks (click here to subscribe), Congress reached an agreement on a two-part bill to fund the federal government and provide for COVID-19 economic relief.

There were several credit union WINS in this package. Credit union leaders, the League, and the Credit Union National Association (CUNA) lobbied extensively for their inclusion. The overall package includes:

  • CARES Act — Troubled Debt Restructure extended through Jan. 1, 2022.
  • CARES Act — NCUA’s Central Liquidity Facility extended through Dec. 31, 2021.
  • Direct Economic Impact Payments/Stimulus Checks in the amount of $600 per qualifying individual. The criteria remains as in the CARES Act (individuals making up to $75,000 per year and couples making $150,000). An additional $600 per dependent will be allotted.
  • An extension of unemployment benefits, plus an additional $300 per-week benefit to run through March 14, 2021.
  • A new round of Paycheck Protection Program (PPP) funds, totaling $284 billion. There will be tranches for community-based lenders. The bill’s summary alludes to a degree of PPP forgiveness from the first round. Here is the latest on PPP funding allocations.
  • $20 billion in new Economic Injury Disaster Loan (EIDL) Grants.
  • $12 Billion in new funds for Community Development Financial Institutions (CDFIs) under a new Neighborhood Capital Investment Program for low income communities. Details can be viewed here from the House Financial Services Committee.
  • $25 billion in a first-ever emergency federal rental assistance program. The Center for Disease Control and Prevention (CDC) eviction moratorium is extended through Jan. 31.
  • Employee retention tax credit is amended for all certain public instrumentalities to claim (namely federally chartered credit unions).
  • You can view congressional committee details and provisions that were built into the bill’s summary titles here: Financial Services and Banking; Ways and Means/Tax Provision; and Small Business/Paycheck Protection Program (PPP).

While many questions will arise from this new package, the League’s advocacy team is reviewing the released content, as well as awaiting the final vote. For questions, please email Jeremy Empol or Lisa Quaranta.

Regarding the appropriations bill: Working with California Representatives Pete Aguilar and Lucile Roybal-Allard, the League has secured a threat assessment to be conducted by the Cybersecurity and Infrastructure Security Agency (CISA) to specifically identify how and what vulnerabilities lead to data compromises at point-of-sale and online purchase systems. This is one of many steps to build in our efforts to mitigate retail data breaches. Details can be found on pages 52 – 53 of this document.

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