New PPP Loans Under Economic Aid Act

The President signed new stimulus legislation into law on December 27, 2020.  The new law, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, P.L. 116-260 (“Economic Aid Act”), authorizes new and additional PPP loans and modifies the CARES Act for this purpose. The Economic Aid Act authorizes funds of $284.5 billion for PPP loans, and which includes $35 billion for first-time borrowers.  The United States Small Business Administration (SBA) and the United States Treasury also issued new guidance interpreting the new law.

The new SBA/Treasury guidance, released in the form of two “interim final rules”, separately addresses the requirements and issues for borrowers who seek their first PPP loan (“First Draw PPP Loan(s)”) and also borrowers that already received a PPP loan in 2020 and who may now qualify for an additional and second PPP loan (“Second Draw PPP Loan(s)”).

Beginning January 11, 2021, Borrowers who seek a First Draw PPP Loan under the new law can apply through community financial institutions exclusively allowed to make First Draw PPP Loans.  Borrowers who seek a Second Draw PPP Loan may apply through the same community financial institutions beginning January 13, 2021.   PPP loans under the new law will be open for all other participating lenders at a date to be determined and which will remain open through March 31, 2021.

The SBA also separately released guidance, titled “Guidance on Accessing Capital for Minority, Underserved, Veteran and Women-Owned Business Concerns”, designed to better assist minority, underserved, veteran, and women-owned businesses in applying for and receiving a PPP loan.

First-Draw PPP Loans

The Economic Aid Act and related SBA/Treasury guidance authorizes borrowers who did not receive an initial PPP loan to now receive a PPP loan.  As before, the maximum PPP loan is $10 million.  The borrower must have been in operation on February 15, 2020 (paying payroll), and be in one or more of the following groups:

  • Businesses that employ no more than 500 employees, or that are otherwise eligible under revenue-based or alternative employee-size standards for the particular business or industry, and including certain Internal Revenue Code Section 501(c) non-profit organizations (e.g. churches).
  • Housing cooperatives, eligible Section 501(c)(6) organizations (such as business leagues, chambers of commerce and visitor bureaus), or an eligible “destination marketing organization”, employing no more than 300 employees and which do not receive more than 15% of receipts from lobbying.
  • Independent contractors, eligible self-employed individuals, or sole proprietors.
  • News organizations, with not more than 500 employees per location, that are majority-owned or controlled by an NAICS code 511110 or 5151 business or not-for-profit public broadcasting entities with a trade or business under NAICS code 511110 or 5151.
  • Hotel, motels, and restaurants (with NAICS codes starting with 72) with no more than 500 employees per physical location.

Certain businesses and organizations continue to not be eligible for a PPP loan, and now also including publicly traded companies, sports leagues, and businesses controlled by the president, vice president, head of executive departments, and members of Congress (or their spouses)

Second-Draw PPP loan Requirements

The new law and related SBA/Treasury guidance also allows borrowers who already received a first PPP to receive a second and additional PPP loan where the borrower has:

  • 300 or fewer employees.
  • Used the full amount of their first PPP loan to pay eligible expenses, and before a second PPP loan may be received.
  • Experienced a reduction of 25% or more in gross receipts for any 2020 quarter as compared to the same quarter in 2019. Under the new SBA/Treasury guidance, a borrower can also satisfy this requirement where the borrower was in operation for all of 2019, and total 2020 annual gross receipts declined by at least 25% as compared with 2019.   The new SBA/Treasury guidance defines gross receipts to include all revenue in whatever form received or accrued from whatever source, including from the sales of products or services, interest, dividends, rents, royalties, fees, or commissions, reduced by returns and allowances.   Forgiven 2020 PPP loans are not included in 2020 gross receipts for these purposes.

PPP Loan Amounts

Both First Draw PPP Loans and Second Draw PPP loans will be for up to 2.5 times average monthly payroll costs (capped at $100,000 per employee annually in 2019, 2020, or the year prior to the loan. PPP borrowers with NAICS codes starting with 72 (hotels, motels, and restaurants generally) can now receive a Second Draw PPP Loan up to 3.5 times average monthly payroll costs. The maximum for a First Draw PPP Loan continues to be capped at $10 million.

Eligible PPP Loan Expenses

Eligible expenses to be funded through either a First Draw PPP Loan or Second Draw PPP Loan are the same as before, including payroll, rent, covered mortgage interest, and utilities. In addition, the following costs are now also eligible:

  • Certain worker protection and facility modification expenditures, including personal protective equipment, to comply with COVID-19 federal health and safety guidelines.
  • Certain property damage costs related to property damage and vandalism or looting due to public disturbances in 2020 that were not covered by insurance or other compensation.
  • Expenditures to suppliers that are essential at the time of purchase to the recipient’s current operations.
  • Other certain operating expenditures, such as payments for business software or cloud computing services; product or service delivery expenses; the processing, payment, or tracking of payroll expenses; human resources; sales and billing functions; or accounting or tracking of supplies, inventory, records, and expenses.

For expenses to be forgivable, borrowers will have to spend at least 60% of the loan proceeds on payroll over an 8 or 24 weeks covered period.


Burr & Forman has a dedicated team to counsel individuals and businesses in government audits, investigations and defense-related to the Paycheck Protection Program (PPP) and Coronavirus Aid, Relief and Economic Security (CARES) Act. The PPP and CARES Act Audit, Investigations and Defense Team represents and advises clients in audits and investigations involving PPP loans and tax benefits that may have been claimed under the CARES Act.  This multidisciplinary team combines more than 230 years of legal experience and attorneys with previous government positions, including attorneys with IRS Chief Counsel, the United States Department of Justice, and United States Attorneys’ Offices.  More information can be found at

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