Paycheck Protection Program – Changes and Deadline to Apply

March 10, 2021

The Biden Administration announced changes to the Paycheck Protection Program two weeks ago. The changes allow the smallest of small businesses, so-called “Mom and Pop” businesses, greater access to the program. Included in the changes is a 14-day exclusive period during which only small businesses with 20 or fewer employees are eligible to apply for PPP loans. The exclusivity period began February 24 and ended March 9th. Now that the period is over lenders may submit applications from all eligible small businesses. In addition to the exclusivity period, the Biden Administration announced changes which expanded eligibility and increased the amount of loans for certain small business owners.

Policy Changes and Additional Changes:

  • Increasing support for independent contractors, sole proprietors, and self-employed individuals
    • New rule allows these borrowers to base their PPP loan on gross income rather than net profit.
  • Fairer access for returning citizens by eliminating exclusionary restriction which prevented small business owners with non-fraud felony conviction  from obtaining PPP loans.
  • Allowing business owners who are delinquent on federal student loan debt to apply for PPP loans.
  • Ensuring access for eligible immigrant-owned small businesses by allowing the use of Individual Taxpayer Identification Numbers (ITINs) on application for PPP loan.

In addition to the changes made by the Biden Administration,  the Economic Aid Act, which reopened the Paycheck Protection Program, expanded the program, and offered clarification on how the loans are taxed.

Changes Implemented by the Economic Aid Act:

  • A borrower may select a covered period anywhere between eight weeks and 24 weeks after the loan is first advanced.
  • Economic Injury Disaster Loans (EIDL) Advances are no longer deducted from PPP loan forgiveness payment.
  • Expenses paid with PPP loan funds are federally tax deductible.
  • Expanded forgivable expenses are permissible for any unforgiven PPP loan
  • Forgiven loans are not federally taxable income (Per the CARES Act).
  • Created a simplified forgiveness application for PPP loans under $150,000.

The Economic Aid Act reopened the Paycheck Protection Program for both First Draw Loans and Second Draw Loans. Eligible small businesses that did not previously obtain a First Draw Loan may apply for a PPP loan. The original eligibility rules and limitations apply to all First Draw Loans. Second Draw Loans are available to certain small businesses who received a First Draw Loan. To be eligible for a Second Draw Loan a business:

  • Must employ no more than 300 employees
  • Must demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020
  • Must have already received a First Draw PPP Loan and will us, or has used, the full amount only for authorized uses

The deadline to apply for the Paycheck Protection Program is March 31, 2021. All eligible entities can apply through a participating lender until then.

As always, the business lawyers at RCO Law stand ready to counsel you on COVID 19-related business issues.


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