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The PPP Extension: 10 Things PPP Lenders Need to Know

Mary Ellen Biery
December 22, 2020
Read Time: 0 min

Extension of PPP with second-draw option is now law  

10 important pieces of information for PPP lenders about the changes tied to the Economic Aid Act. 

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Paycheck Protection Program Extended

Main points of interest to PPP lenders

This article was updated to include signing of the legislation and additional details from SBA guidance, including details on lender fees.

The logistics are still evolving, but one thing is clear: the Paycheck Protection Program (PPP) extension was finally signed by President Donald Trump Dec. 27, which means additional funds for small businesses are on the way. Here’s what financial institution lenders seeking to assist their communities with PPP loans in the new round need to know.

How much PPP money is in the new relief package?

As part of a $900 billion stimulus package aimed at blunting the economic impacts of COVID-19, nearly $431 billion is included to target helping small businesses. The "Coronavirus Response and Relief Supplemental Appropriations Act 2021" authorizes the use of $146.5 billion in remaining CARES Act funding. One section of the law,  "The Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act", or the Economic Aid Act, also provides new appropriations of $284.45 billion for first- and second-time PPP borrowers (so-called second-draw loans), as well as other SBA programs, such as the Economic Injury Disaster Loans (EIDL) program and SBA 7(a).

The PPP extension still relies on financial institutions, other lenders

The upcoming wave of PPP funding will continue to use financial institutions and other lenders for collecting loan applications and disbursing funds. Treasury Secretary Steven Mnuchin said in an interview on CNBC Monday that the federal government would utilize “similar distribution as last time” for the PPP extension, which he said would provide additional money for the hardest-hit parts of the economy. “Not only are we recycling 140 billion [dollars] that’s been sitting there, but we have substantial other monies, over 325 billion [dollars] targeted for small business,” Mnuchin said. The PPP program in this round will be “much more directed,” he said, adding that “If businesses are down 25%, they’ll be able to get a second check.”

A broader list of eligible covered expenses for PPP

Details of the PPP extension are included in a law that’s nearly 5,600-pages and combines relief efforts with overall government funding. The specific measures related to small business lending broaden the list of eligible PPP expenses for new borrowers and past borrowers, as long as their loans haven't already been forgiven. It also allows all past and future PPP borrowers to deduct expenses paid for by PPP loans. Expanded eligible expenses include costs for software, operating or capital expenditures related to worker protection, and essential supplies.

PPP second draw requirements

The new law's PPP extension and expansion will provide for a second draw loan to some PPP borrowers who meet certain eligibility requirements. To qualify for a second PPP loan of up to $2 million, for example, a business has to have fewer than 300 employees and demonstrate a drop of 25% or more in gross receipts.

“To qualify for a 2nd PPP loan, a business would have to have fewer than 300 employees and show a 25%+ drop in receipts”

Stay up to date on PPP changes and best practices.

Includes set-asides for first-time borrowers, smaller lenders

Lawmakers directed at least $35 billion to be used to guarantee loans for first-time PPP borrowers. They also set aside pots of money for other specific uses, including:

  • $15 billion for initial and second-draw PPP loans issued by community financial institutions, including Community Development Financial Institutions (CDFIs) and Minority Depository Institutions (MDIs)
  • $15 billion for insured depository institutions, credit unions, and Farm Credit System institutions with less than $10 billion in assets
  • At least $15 billion for guaranteeing loans of up to $250,000 to an eligible recipient in a low- or moderate-income neighborhood under the Community Reinvestment Act or for loans made to recipients with no more than 10 employees

Fee structure for lenders is changing

Lender reimbursement for processing and servicing PPP loans also changes under the PPP extension and expansion. For first draw loans up to $50,000, lenders will receive the lesser of 50 percent of the balance of the financing outstanding at the time of disbursement of the covered loan or $2,500.

For loans above $50,000, lenders will be paid a percentage of the balance of the financing outstanding at the time of covered loan’s disbursement.

  • 5 percent for a covered loan of more than $50,000 and not more than $350,000; and
  • 3 percent for a covered loan of more than $350,000 and less than $2 million; and
  • 1 percent for loans of $2 million or more.

For second draw loans, the fees are the same except the percentage is 3 percent for covered loans above $350,000.

According to the Interim Final Rule describing the changes to the PPP from the Economic Aid Act, the SBA will pay the lender fee five  days after the reported disbursement of the PPP loan. Also, the law requires that the SBA may not require that the fee be repaid by the lender unless the lender is found guilty of an act of fraud in connection with the PPP

Under the current PPP fee structure, SBA lenders are also paid based on the balance of outstanding financing at the time of disbursement of the covered loan:

  • 5 percent for loans up to $350,000.
  • 3 percent for loans of more than $350,000 and less than $2,000,000
  • 1 percent for loans of not less than $2,000,000

When the new PPP lending window opens 

Community Development Financial Institutions (CDFIs), Minority Depository Institutions, Certified Development Companies and Microloan Intermediaries could begin submitting applications for first draw loans to the SBA online portal, E-Tran, on Jan. 11. The portal opened Jan. 13 to those institutions for second draw loans. It opens Jan. 15 to PPP-eligible lenders with $1 billion or less in assets submitting first and second draw loans, and to all other lenders on Jan. 19 for applications for first and second draw loans. Stay tuned to Abrigo's PPP resources page for lenders for other developments on SBA regulations and guidance.

Several changes to loan forgiveness processes

Lawmakers also approved a simpler PPP loan forgiveness process for loans of less than $150,000. They directed the SBA within 24 days of the law’s approval to establish a one-page certification that requires the borrower to provide the following information in order to achieve loan forgiveness:

  • a description of the number of employees retained because of the loan
  • the estimated amount of the covered loan amount spent on payroll costs
  • the total loan value

The form would also require the borrower to attest they have complied with the program requirements and will retain employment records relevant to the form that prove compliance for four years and other records for three years. Another change included in the latest coronavirus relief act is related to the "covered period," or the period during which PPP loan funds spent may be covered for forgiveness, and it will provide additional flexibility to borrowers. Currently, the covered period for borrowers’ loan forgiveness ends either 8 or 24 weeks from the date the PPP loan was disbursed. The new law would allow borrowers to select an ending date that falls anywhere between 8 and 24 weeks after disbursement. The law does not specify whether this applies to new loans only or to previously approved and/or forgiven loans as well.

Expanded “hold-harmless” for lenders

Lawmakers also approved a new “hold harmless” provision for lenders that rely on certification or documentation from borrowers for origination or forgiveness applications. While the SBA has previously said lenders can rely on documentation by applicants/borrowers, the new provision spells out in detail how acting in good faith based on that reliance protects them from enforcement actions and penalties. The law says it applies to any loan made under the Paycheck Protection Program, including loans made "before, on, or after the date of enactment of this Act, including forgiveness of such a loan."

Repeal of EIDL Advance deduction

Lawmakers also repealed the CARES Act’s original requirement that EIDL Advances be deducted from PPP loans. “It is the sense of Congress that borrowers of loans made…in response to COVID-19 during the covered period should be made whole, without regard to whether those borrowers are eligible for forgiveness with respect to those loans,” the law says. It directs the SBA to issue rules ensuring equal treatment of borrowers that completed the loan forgiveness process before the PPP extension law was passed.

Our team is closely monitoring relief updates. Whether you are ready to see a demo of our software or have questions about navigating the next round of PPP or forgiveness, our team is here to help. Learn more.


About the Author

Mary Ellen Biery

Senior Strategist & Content Manager
Mary Ellen Biery is Senior Strategist & Content Manager at Abrigo, where she works with advisors and other experts to develop whitepapers, original research, and other resources that help financial institutions drive growth and manage risk. A former equities reporter for Dow Jones Newswires whose work has been published in

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Abrigo enables U.S. financial institutions to support their communities through technology that fights financial crime, grows loans and deposits, and optimizes risk. Abrigo's platform centralizes the institution's data, creates a digital user experience, ensures compliance, and delivers efficiency for scale and profitable growth.

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