The Small Business Administration (SBA) recently updated its Paycheck Protection Program (PPP) Frequently Asked Questions page to address changes made by the Economic Aid Act, passed in December 2020.
The Act extended the date by which new PPP loan applications may be filed (including applications from certain existing PPP borrowers seeking a second PPP loan) until March 31, 2021. SBA’s revised FAQ #46 offers new clarity for borrowers seeking second-draw PPP loans. In order to be eligible, applicants must have had a 25% drop in gross revenues between a comparable calendar quarter in 2019 and 2020. The applicant also must certify that “current economic uncertainty” makes the loan request necessary “to support the ongoing operations” of the business making the application.
According to FAQ #46, if a second-draw PPP loan applicant can show the required 25% drop in gross revenues, it will be deemed to have made the statutory “necessity certification” in good faith. While necessity certifications are required, SBA apparently does not intend to review or audit certifications made by applicants that show the required gross revenue drop in their loan applications.
FAQ #46 also states that SBA will not combine first- and second- draw loan amounts for purposes of the $2 million loan threshold that triggers the need for a Form 3509 certification questionnaire when filing for loan forgiveness.
On a related note, all dealers should discuss their eligibility to claim Employee Retention Tax Credits (ERTC) with their accountant or financial advisor. The Economic Aid Act retroactively allows PPP loan borrowers to claim the ERTC for qualified wages not paid for with PPP loan proceeds. It also extended ERTC eligibility through June 30, 2021. To claim the ERTC, a dealership must have had to experience either 1) a full or partial shutdown due to a government order related to the coronavirus pandemic or 2) a significant decline in revenue in a calendar quarter. Specifically, to meet the second criteria, gross receipts must have fallen by at least 50% for the same calendar quarter from 2019 to 2020, or at least 80% for the same calendar quarter from 2019 to 2021. The IRS recently issued updated guidance on this matter.
For more information, visit the SBA PPP website.