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CORONAVIRUS RELIEF ALERT — CARES Act Alert #16: SBA Gives PPP Priority to the Smallest Entities

by | Feb 26, 2021 | Firm News |

Earlier this week, the Small Business Administration (SBA) issued a notice stating that from now until March 10, 2021, only those businesses and nonprofits with fewer than 20 employees will be allowed to submit an application to receive a loan under the Paycheck Protection Program (PPP). This temporary change aims to ensure that the smallest of small businesses and nonprofits have sufficient opportunity to apply for and receive either a First or Second Draw from the PPP before the program expires at the end of March.

As part of recently enacted pandemic relief legislation, Congress prioritized small and low- and moderate-income (LMI) businesses and nonprofits by reserving for them $15 billion of the $284 billion appropriated for the reopened PPP. However, only $2.4 billion has gone to small and LMI borrowers thus far while a total of $140.3 billion has been expended. So, the SBA is seeking to bolster assistance to those entities most vulnerable to the economic aftershocks of the pandemic.

The SBA also will increase support for sole proprietors, independent contractors, and self-employed individuals by permanently revising the PPP’s funding formula for these applicants. Many such applicants previously were excluded from the PPP or were approved for as little as $1 because of how PPP loans were calculated. The upcoming rule should increase their payouts and encourage the smallest entrepreneurs to apply. For example, if you are an independent musician still unable to book sufficient engagements due to reduced demand for church weddings and other activities, a PPP forgivable loan can help tide you over until fuller reopening for such activities. The SBA also will reserve $1 billion for the self-employed who live in LMI areas.

Economic woes from the pandemic have dragged on longer than many expected. Consider applying for a PPP loan before its scheduled expiration in less than five weeks (March 31, 2021).

To explain key relief for 501(c)(3) non-profits and small businesses in the CARES Act (complete text) and related legislation, including the Economic Aid Act (Division N of the Consolidated Appropriations Act of 2021, complete text), we published our CARES Alert #1 (Help for Small Businesses & 501(c)(3)s via the PPP); CARES Alert #2 (Get Ready to Apply); CARES Alert #3 (PPP vs EIDL), CARES Alert #4 (Treasury Guidance), CARES Alert #5 (SBA’s Interim Final Rule), CARES Alert #6 (IFR on Affiliation & Religious Nonprofits); CARES Alert #7 (FBO Guidance), CARES Alert #8 (Unemployment Benefits, including FBOs); CARES Alert #9 (Safe Harbor Guidance); CARES Alert #10 (Fixes to the PPP); CARES Alert #11 (New EZ PPP Forgiveness Application); CARES Alert #12 (PPP Application Deadline Extended); CARES Alert #13 (PPP Forgiveness FAQs); CARES Alert #14 (PPP Second Draw); and CARES Alert #15 (Rule for PPP Second Draw).

Our CARES Act Team is available to help you navigate these difficult issues, including the unique issues faced by nonprofits, religious organizations, and churches. For assistance, please contact one of our designated attorneys: Nancy LeSourdMatthew SzymanskiScott Ward, or Derek Gaubatz. Our CARES Act Team also includes our non-attorney consultant Phil Eskeland. Mr. Szymanski and Mr. Eskeland bring experience from their past service, respectively, as the chief of staff and the deputy chief of staff of the Small Business Committee of the U.S. House of Representatives, including during the legislative response to 9/11.