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PPP Loan Applications for 2021: What You Need to Know

01/13/2021

By Amy Lou Blunt, EVP, Chief Credit Officer

While the PPP re-opened January 11, 2021, only a small number of select community development financial institutions were granted access to the SBA submission portal, so far. Banks have been instructed to watch for the portal updates that opens access to all. No specific dates have been provided, so we will continue to watch for the “gates to open.”

RBAZ is Accepting Applications

In the meantime, we are accepting applications for both First Draw Loan and Second Draw Loan applicants:

The businesses must also be able to demonstrate/document a 25% decline in revenues from 2019 to 2020. To do so, you must select either a particular quarter in 2019 and compare to the same quarter in 2020, or are able to demonstrate the decline on an annual basis.

This measure is calendar year 2019 compared to calendar year 2020; borrowers who are not self-employed, including sole proprietorships and independent contractors, may use the 12 month period immediately preceding the funding of your 2021 loan. (The latter is more difficult to calculate, and likely not the choice for the majority of our clients.) The SBA Overview of the basic terms and eligibility for Second Draw Loans can be found here.

Supporting Documentation

We have received numerous requests for a listing of required documentation to support the applications. This is a little trickier than the last round. There are multiple scenarios given the different types of entities, businesses, size of loans, etc. Let’s see if I can make this easy and concise:

FIRST DRAW LOANS

In general, the maximum loan amount for the First Draw PPP Loan is equal to 2.5x borrower’s average monthly payroll costs, not to exceed $2,000,000. There are a myriad of methodologies offered to assist you in determining your loan amount, and can be found in the SBA Interim Final Rule. The documentation required to substantiate an applicant’s payroll cost calculations includes:

  • Your Form 941 and state quarterly wage unemployment insurance tax reporting forms from each quarter in 2019 or 2020 (whichever you choose to use to calculate your loan amount), or equivalent payroll processor records
  • Evidence of any retirement and health insurance contributions

You must also provide a payroll statement or similar documentation from the pay period that covers February 15, 2020 to establish you were in operation on that date (a requirement for eligibility).

If you are self-employed and file a Form 1040 Schedule C, you must provide the 2019 or 2020 (whichever you used to calculate the loan amount) Form 1040 Schedule C, along with IRS Form 1099-MISC detailing non-employee compensation. If using 2020 to calculate the loan amount, and you have not filed your tax return, you will still complete the Schedule C completely and accurately and submit to the lender along with your application.

SECOND DRAW LOANS

In general, the maximum loan amount for the Second Draw PPP Loan is equal to 2.5x borrower’s average monthly payroll costs (or 3.5X for Accommodation or Food Service Businesses), not to exceed $2,000,000. There are a myriad of methodologies offered to assist you in determining your loan amount, and can be found in the SBA Interim Final Rule Second Draw Loans.

The documentation required to substantiate an applicant’s payroll cost calculations is generally the same as documentation required for First Draw PPP Loans. However, no additional documentation to substantiate payroll costs will be required if:

  • The applicant used calendar year 2019 figures to determine its First Draw PPP Loan amount, AND
  • Used calendar year 2019 figures to determine its Second Draw PPP Loan amount (instead of opting to use 2020) AND
  • The lender is the same for both loans.

However, the lender/bank may request additional documentation as necessary, to fulfill its obligation to conduct a good faith review of the loan amount calculation.

Revenue Reduction

You must also submit documentation to establish that you/your business experienced a revenue reduction of 25% or greater in 2020, relative to 2019. A borrower must calculate this revenue reduction by comparing quarterly gross receipts for one quarter in 2020 with gross receipts for the corresponding quarter in 2019. Such documentation may include tax forms and/or quarterly financial statements.

A borrower that was in operation in all four quarters of 2019 may compare annual gross receipts with annual grow receipts in 2020. This provision allows borrower to provide annual tax return forms to substantiate revenue reduction.

Patience Requested for Staged Roll Out

At the “Ask the Regulator” meeting, they stressed patience with the staged roll out of the Re-Launch of the Paycheck Protection Program. Congress has authorized a total program level of $806,450,000,000 to support both the First and Second Draw Loans. Both the size of the appropriation, as well as the restructured terms, were designed to support businesses in need and avoid the issues of the initial PPP. The deadline for submission of applications is March 31, 2021.

Watch for More Updates from RBAZ

We have provided links directly to SBA documentation that should help customers, and remember to include your CPA in your process! You can submit your applications and questions to our dedicated email: [email protected].

And, once our access to submit applications to the SBA is re-opened, we will let customers know!

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