The United States Small Business Administration (the “SBA”) has announced that the Paycheck Protection Program (“PPP”) reopened on Monday, January 11, 2021. This financial assistance program is now available for new borrowers and for certain existing PPP loan (a “PPP Loan”) borrowers. New York State’s new “Raising the Bar” Restaurant Recovery Fund also opened on January 11th, and it offers $5,000 of financial assistance to qualifying full-service restaurant owners.
Important new information about these financial assistance programs, which are intended to assist business owners through these struggling times caused by the coronavirus pandemic, includes the following.
What is the Payroll Protection Program?
The PPP was established as part of The CARES Act of 2020, in response to the coronavirus outbreak and the economic difficulties that resulted. It is a federally backed, forgivable loan program that offers small business owners financial assistance. Depending on eligibility and how the business utilizes the funds, a PPP Loan may be fully or partially forgivable.
Who is Eligible?
Only community financial institutions were initially eligible to make “First Draw PPP Loans,” which started on January 11th. “Second Draw PPP Loans” opened on Wednesday, January 13th. However, PPP participation is anticipated to soon become possible for all participating lenders. While updated PPP Loan guidance can be found on the SBA website, below is a summary of some key points to understand.
Helping Those in Need
This round of the PPP continues to prioritize millions of Americans who are employed by small businesses. The PPP authorizes up to $284 billion toward job retention and certain other business-related expenses through March 21, 2021. Certain existing PPP borrowers can also apply for a Second Draw PPP Loan.
Key PPP updates for 2021 include:
- PPP borrowers can set their PPP Loan’s covered period to be any length between eight and 24 weeks, based on their business needs.
- PPP Loans will cover additional business expenses, including operations expenditures, property damage costs, supplier costs, and worker protection expenditures.
- PPP eligibility is expanded to include 501(c)(6) designated entities, housing cooperatives, and direct marketing organizations (among other types of organizations).
- PPP now provides greater flexibility for seasonal employees.
- Certain existing PPP borrowers can request modification of their First Draw PPP Loan amount.
- Certain existing PPP borrowers are now eligible to apply for a Second Draw PPP Loan.*
*A borrower is generally eligible for a Second Draw PPP Loan if they previously received a First Draw PPP Loan and will or has used the full amount only for authorized uses. In addition, Second Draw borrowers cannot have more than 300 employees and must be able to demonstrate at least a 25% reduction in gross receipts between comparable quarters during 2019 and 2020.
“Raising the Bar” Recovery Fund
New York State’s new “Raising the Bar” program also opened on January 11th. It offers approximately $3 million in reimbursement grants, with up to $5,000 possibly available per eligible business. This program is intended to support full-service restaurants now dealing with strict COVID-19 safety restrictions and new mandates during the winter months, when outdoor dining is limited.
To qualify for the “Raising the Bar” Restaurant Recovery Fund, a borrower must:
- Be a full-service restaurant (NAICS code 722511), or be an establishment engaged in providing food services and meals prepared on-premises to patrons who traditionally order and are served while seated. In other words, service from a waiter or waitress. This includes on-premises food and drinking establishments licensed through the State Liquor Authority (SLA). Establishments that provide take-out or grab-and-go food services due to COVID-19 restrictions are also eligible.
- Have no more than $3 million in 2019 revenue. Be located within New York State.
- Have been in operation since on or before March 1, 2019.
- Certify and demonstrate financial hardship due to COVID-19.
- Agree to comply with all applicable New York State and local reopening guidance, including all COVID-19 health and safety policies.
Franchises are not eligible for participation in the “Raising the Bar” Restaurant Recovery Fund.
Additional information has been released by, and is becoming available from, the SBA. Therefore, be sure to regularly check its website for updates. For more information, visit sba.gov/ppp If you are a small business owner in New York and need help navigating the legal and financial complexities of the PPP Loan program as you develop your 2021 business plan, contact me today.
