Business Loan Program Temporary Changes; Paycheck Protection Program Second Draw Loans

Record facts

Summary

An interim final rule of the U.S. Small Business Administration on Paycheck Protection Program Second Draw Loans, 13 CFR Parts 120 and 121, Docket No. SBA-2021-0002, RIN 3245-AH63, published in the Federal Register of January 14, 2021 (Vol. 86, No. 9), effective January 12, 2021 with comments due February 16, 2021. It implements section 311 of the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, Pub. L. 116-260, which added a temporary section 7(a)(37) to the Small Business Act, 15 U.S.C. 636(a)(37). The rule states key terms: a guarantee percentage of 100 percent, no collateral or personal guarantees, an interest rate of 100 basis points, and a maturity of five years, with loans available through March 31, 2021. It sets eligibility at 300 or fewer employees, full use of a First Draw PPP Loan, and a revenue reduction of 25% or greater in 2020 relative to 2019.

Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used

Full text

3712 
Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations 
the program would expire before the 
procedural steps, including the 
comment periods generally required by 
the Paperwork Reduction Act, could be 
completed. 
Regulatory Flexibility Act (RFA) 
The Regulatory Flexibility Act (RFA) 
generally requires that when an agency 
issues a proposed rule, or a final rule 
pursuant to section 553(b) of the APA or 
another law, the agency must prepare a 
regulatory flexibility analysis that meets 
the requirements of the RFA and 
publish such analysis in the Federal 
Register. 5 U.S.C. 603, 604. Specifically, 
the RFA normally requires agencies to 
describe the impact of a rulemaking on 
small entities by providing a regulatory 
impact analysis. Such analysis must 
address the consideration of regulatory 
options that would lessen the economic 
effect of the rule on small entities. The 
RFA defines a ‘‘small entity’’ as (1) a 
proprietary firm meeting the size 
standards of the Small Business 
Administration (SBA); (2) a nonprofit 
organization that is not dominant in its 
field; or (3) a small government 
jurisdiction with a population of less 
than 50,000. 5 U.S.C. 601(3)–(6). Except 
for small government jurisdictions with 
a population of less than 50,000, neither 
State nor local governments are ‘‘small 
entities.’’ 
The requirement to conduct a 
regulatory impact analysis does not 
apply if the head of the agency ‘‘certifies 
that the rule will not, if promulgated, 
have a significant economic impact on 
a substantial number of small entities.’’ 
5 U.S.C. 605(b). The agency must, 
however, publish the certification in the 
Federal Register at the time of 
publication of the rule, ‘‘along with a 
statement providing the factual basis for 
such certification.’’ If the agency head 
has not waived the requirements for a 
regulatory flexibility analysis in 
accordance with the RFA’s waiver 
provision, and no other RFA exception 
applies, the agency must prepare the 
regulatory flexibility analysis and 
publish it in the Federal Register at the 
time of promulgation or, if the rule is 
promulgated in response to an 
emergency that makes timely 
compliance impracticable, within 180 
days of publication of the final rule. 5 
U.S.C. 604(a), 608(b). 
Rules that are exempt from notice and 
comment are also exempt from the RFA 
requirements, including conducting a 
regulatory flexibility analysis, when 
among other things the agency for good 
cause finds that notice and public 
procedure are impracticable, 
unnecessary, or contrary to the public 
interest. Small Business 
Administration’s Office of Advocacy 
guide: How to Comply with the 
Regulatory Flexibility Ac. Ch.1. p.9. 
Since this rule is exempt from notice 
and comment, SBA is not required to 
conduct a regulatory flexibility analysis. 
Authority: 15 U.S.C. 636(a)(36); 
Coronavirus Aid, Relief, and Economic 
Security Act, Pub. L. 116–136, section 1114 
and Economic Aid to Hard-Hit Small 
Businesses, Nonprofits, and Venues Act (Pub. 
L. 116–260), section 303. 
Jovita Carranza, Michael Faulkender, 
Assistant Secretary for Economic Policy. 
[FR Doc. 2021–00451 Filed 1–12–21; 4:15 pm] 
BILLING CODE 8026–03–P 
SMALL BUSINESS ADMINISTRATION 
13 CFR Parts 120 and 121 
[Docket No. SBA–2021–0002] 
RIN 3245–AH63 
Business Loan Program Temporary 
Changes; Paycheck Protection 
Program Second Draw Loans 
AGENCY: U.S. Small Business 
Administration. 
ACTION: Interim final rule. 
SUMMARY: This interim final rule 
announces the implementation of 
section 311 of the Economic Aid to 
Hard-Hit Small Businesses, Nonprofits, 
and Venues Act (the Economic Aid Act). 
The Economic Aid Act authorizes the 
U.S. Small Business Administration to 
guarantee additional loans under the 
temporary Paycheck Protection 
Program, which was originally 
established under the Coronavirus Aid, 
Relief, and Economic Security Act to 
provide economic relief to small 
businesses nationwide adversely 
impacted under the Coronavirus Disease 
2019 (COVID–19) Emergency 
Declaration (COVID–19 Emergency 
Declaration) issued by President Trump 
on March 13, 2020. Section 311 of the 
Economic Aid Act adds a second 
temporary program to SBA’s 7(a) Loan 
Program titled, ‘‘Paycheck Protection 
Program Second Draw Loans.’’ This 
interim final rule implements the key 
provisions of section 311 of the 
Economic Aid Act and requests public 
comment. 
DATES: 
Effective Date: This interim final rule 
is effective January 12, 2021. 
Applicability Date: This interim final 
rule applies to loan applications and 
applications for loan forgiveness 
submitted for Paycheck Protection 
Program Second Draw Loans. 
Comment Date: Comments must be 
received on or before February 16, 2021. 
ADDRESSES: You may submit comments, 
identified by number SBA–2021–0002 
through the Federal eRulemaking Portal: 
http://www.regulations.gov. Follow the 
instructions for submitting comments. 
SBA will post all comments on 
www.regulations.gov. If you wish to 
submit confidential business 
information (CBI) as defined in the User 
Notice at www.regulations.gov, please 
send an email to ppp-ifr@sba.gov. All 
other comments must be submitted 
through the Federal eRulemaking Portal 
described above. Highlight the 
information that you consider to be CBI 
and explain why you believe SBA 
should hold this information as 
confidential. SBA will review the 
information and make the final 
determination whether it will publish 
the information. 
FOR FURTHER INFORMATION CONTACT: Call 
Center Representative at 833–572–0502, 
or the local SBA Field Office; the list of 
offices can be found at https://
www.sba.gov/tools/local-assistance/ 
districtoffices. 
SUPPLEMENTARY INFORMATION: 
I. Background Information 
On December 27, 2020, President 
Trump signed the Economic Aid to 
Hard-Hit Small Businesses, Nonprofits, 
and Venues Act (the Economic Aid Act) 
(Pub. L. 116–260) into law to provide 
continued assistance to individuals and 
businesses that have been financially 
impacted by the ongoing coronavirus 
pandemic. Section 311 of the Economic 
Aid Act added a new temporary section 
7(a)(37) to the Small Business Act (15 
U.S.C. 636(a)(37)). This new section 
authorizes the U.S. Small Business 
Administration (SBA or the 
Administration) to guarantee Paycheck 
Protection Program Second Draw Loans 
(PPP Second Draw Program), under 
generally the same terms and conditions 
available under the Paycheck Protection 
Program (PPP) established under section 
7(a)(36) of the Small Business Act (15 
U.S.C. 636(a)(36)). Under section 311, 
SBA may guarantee loans under the PPP 
Second Draw Program through March 
31, 2021 (‘‘Second Draw PPP Loans’’) to 
borrowers that previously received a 
PPP loan under section 7(a)(36) of the 
Small Business Act (‘‘First Draw PPP 
Loans’’) and have used or will use the 
full amount of the initial PPP loan for 
authorized purposes on or before the 
expected date of disbursement of the 
Second Draw PPP Loan. 
Like First Draw PPP Loans, Second 
Draw PPP Loans are intended to provide 
expeditious relief to America’s small 
VerDate Sep<11>2014 
00:10 Jan 14, 2021
Jkt 253001
PO 00000
Frm 00022
Fmt 4701
Sfmt 4700
E:\FR\FM\14JAR6.SGM
14JAR6
khammond on DSKJM1Z7X2PROD with RULES6

3713 
Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations 
1 The Consolidated First Draw PPP IFR titled 
‘‘Business Loan Program Temporary Changes: 
Extension of and Changes to Paycheck Protection 
Program’’ restates existing regulatory provisions to 
provide lenders and new PPP borrowers a single 
regulation to consult on borrower eligibility, lender 
eligibility, and loan application and origination 
requirements issues for new First Draw PPP loans, 
as well as general rules relating to First Draw PPP 
Loan increases and loan forgiveness. 
2 Section 339 of the Economic Aid Act added 
‘‘calculated on a non-compounding, non-adjustable 
basis’’ to the maximum interest rate for a PPP loan. 
3 SBA will be revising the FAQs to conform to the 
Economic Aid Act as quickly as feasible. 
4 See paragraph 7(a)(37)(A)(iv) of the Small 
Business Act. 
5 See paragraph 7(a)(37)(O) of the Small Business 
Act. 
6 Subsection (B)(11) of the Consolidated First 
Draw PPP IFR specifies that the proceeds of a PPP 
loan may be spent only on certain eligible expenses. 
7 See paragraph 7(a)(37)(A)(iv) of the Small 
Business Act. 
businesses. Second Draw PPP Loans 
generally are guaranteed by SBA under 
the same terms, conditions, and 
processes as First Draw PPP Loans. SBA 
guarantees 100 percent of Second Draw 
PPP Loans and SBA may forgive up to 
the full principal loan amount. Second 
Draw PPP Loans are subject to SBA’s 
and the Department of the Treasury’s 
(Treasury’s) consolidated interim final 
rules implementing updates to the 
Paycheck Protection Program for First 
Draw PPP Loans (‘‘Consolidated First 
Draw PPP IFR’’) issued concurrently 
with this interim final rule (IFR) 1 and 
all PPP loan program requirements, 
except as specified in this IFR. The key 
differences between First Draw PPP 
Loans and Second Draw PPP Loans are 
described in this IFR, which explains 
the loan terms, eligibility requirements, 
and application process for Second 
Draw PPP Loans. 
II. Comments and Immediate Effective 
Date 
This interim final rule is being issued 
without advance notice and public 
comment because section 303 of the 
Economic Aid Act authorizes SBA to 
issue regulations to implement the 
Economic Aid Act without regard to 
notice requirements. In addition, this 
rule is being issued to allow for 
immediate implementation of this 
program. The intent of the Economic 
Aid Act is that SBA provide relief to 
America’s small businesses 
expeditiously. The last day to apply for 
and receive a PPP loan is March 31, 
2021. Given the short duration of this 
program, and the urgent need to issue 
loans quickly, the Administrator in 
consultation with the Secretary has 
determined that it is impractical and not 
in the public interest to provide a 30- 
day delayed effective date. An 
immediate effective date will give small 
businesses the maximum amount of 
time to apply for loans and lenders the 
maximum amount of time to process 
applications before the program ends. 
This good cause justification also 
supports waiver of the 60-day delayed 
effective date for major rules under the 
Congressional Review Act at 5 U.S.C. 
808(2). Although this IFR is effective 
immediately, comments are solicited 
from interested members of the public 
on all aspects of the interim final rule. 
These comments must be submitted on 
or before February 16, 2021. SBA will 
consider these comments and the need 
for making any revisions as a result of 
these comments. 
III. Summary of Key Terms of PPP 
Second Draw Loans 
The rules applicable to Second Draw 
PPP Loans are published in section IV 
of this IFR. This summary provides 
additional information and explains the 
key terms in the IFR. All references to 
subsections refer to section IV. 
Second Draw PPP Loans are generally 
subject to the same terms, conditions 
and requirements as First Draw PPP 
Loans. These include, but are not 
limited to the following terms: 
• The guarantee percentage is 100 
percent. 
• No collateral will be required. 
• No personal guarantees will be 
required. 
• The interest rate will be 100 basis 
points or one percent, calculated on a 
non-compounding, non-adjustable 
basis.2 
• The maturity is five years. 
• All loans will be processed by all 
lenders under delegated authority and 
lenders will be permitted to rely on 
certifications of the borrower to 
determine the borrower’s eligibility and 
use of loan proceeds. 
Subsection (b) of this IFR confirms 
that these terms apply to Second Draw 
PPP Loans. Subsection (b) also confirms 
that SBA’s Consolidated First Draw PPP 
IFR, Frequently Asked Questions 
(FAQs), and other guidance about PPP 
loans under section 7(a)(36) of the Small 
Business Act (15 U.S.C. 636(a)(36)) 
apply to Second Draw PPP Loans, 
except as specified in this IFR.3 
The Economic Aid Act includes terms 
and conditions, including but not 
limited to terms relating to eligibility 
and a borrower’s maximum loan 
amount, that apply only to Second Draw 
PPP Loans and do not apply to First 
Draw PPP Loans, regardless of when the 
First Draw PPP Loan is made. These 
terms and conditions specific to Second 
Draw PPP Loans are summarized below. 
A. Eligibility Requirements 
1. General Eligibility Requirements 
In general, the Economic Aid Act 
made the eligibility requirements for 
Second Draw PPP Loans narrower than 
the eligibility requirements for First 
Draw PPP Loans. The Economic Aid Act 
generally provides that a borrower is 
eligible for a Second Draw PPP Loan 
only if it has 300 or fewer employees 
and experienced a revenue reduction in 
2020 relative to 2019 (described further 
below).4 In addition, the Economic Aid 
Act provides that a Second Draw PPP 
Loan may only be made to an eligible 
borrower that (i) has received a First 
Draw PPP Loan, and (ii) has used, or 
will use, the full amount of the First 
Draw PPP Loan on or before the 
expected date on which the Second 
Draw PPP Loan is disbursed to the 
borrower.5 Accordingly, subsections 
(c)(1)(i) through (c)(1)(iv) of this IFR 
implement these criteria. Subsection 
(c)(1)(ii) of the IFR clarifies that ‘‘the full 
amount’’ of the borrower’s First Draw 
PPP Loan includes the amount of any 
increase on such First Draw PPP Loan 
made pursuant to the Economic Aid 
Act. In addition, subsection (c)(1)(ii) of 
the IFR clarifies that the borrower must 
have spent the full amount of its First 
Draw PPP Loan on eligible expenses 
under the PPP rules to be eligible for a 
Second Draw PPP Loan. This 
clarification will help ensure program 
integrity by preventing a borrower from 
receiving a Second Draw PPP Loan if 
the borrower has not complied with PPP 
loan program requirements.6 
2. Revenue Reduction Requirement 
The Economic Aid Act provides that, 
to be eligible for a Second Draw PPP 
Loan, the borrower must have 
experienced a revenue reduction of 25% 
or greater in 2020 relative to 2019.7 A 
borrower must calculate this revenue 
reduction by comparing the borrower’s 
quarterly gross receipts for one quarter 
in 2020 with the borrower’s gross 
receipts for the corresponding quarter of 
2019. For example, a borrower with 
gross receipts of $50,000 in the second 
quarter of 2019 and gross receipts of 
$30,000 in the second quarter of 2020 
has experienced a revenue reduction of 
40 percent between the quarters, and is 
therefore eligible for a Second Draw PPP 
loan (assuming all other eligibility 
criteria are met). Subsection (c)(1)(iv)(A) 
of the IFR reflects this methodology. 
Subsection (c)(1)(iv)(B) of the IFR 
provides that a borrower that was in 
operation in all four quarters of 2019 is 
deemed to have experienced the 
required revenue reduction if it 
VerDate Sep<11>2014 
00:10 Jan 14, 2021
Jkt 253001
PO 00000
Frm 00023
Fmt 4701
Sfmt 4700
E:\FR\FM\14JAR6.SGM
14JAR6
khammond on DSKJM1Z7X2PROD with RULES6

3714 
Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations 
8 For an eligible nonprofit organization, a veterans 
organization, an eligible nonprofit news 
organization, eligible 501(c) organization, or eligible 
destination marketing organization, gross receipts 
has the meaning in section 6033 of the Internal 
Revenue Code of 1986. See paragraph 7(a)(37)(I)(ii) 
of the Small Business Act. Subsection (c)(2) of the 
IFR clarifies that this definition, which generally 
relates to eligible nonprofit organizations, applies 
only to eligible nonprofit news organizations rather 
than to all eligible news organizations. 
9 Subsection (c)(2) of the IFR generally defines 
gross receipts to include all revenue in whatever 
form received or accrued (in accordance with the 
entity’s accounting method) from whatever source, 
including from the sales of products or services, 
interest, dividends, rents, royalties, fees, or 
commissions, reduced by returns and allowances. 
Generally, receipts are considered ‘‘total income’’ 
(or in the case of a sole proprietorship, independent 
contractor, or self-employed individual ‘‘gross 
income’’) plus ‘‘cost of goods sold,’’ and excludes 
net capital gains or losses as these terms are defined 
and reported on IRS tax return forms. Gross receipts 
do not include the following: Taxes collected for 
and remitted to a taxing authority if included in 
gross or total income (such as sales or other taxes 
collected from customers and excluding taxes 
levied on the concern or its employees); proceeds 
from transactions between a concern and its 
domestic or foreign affiliates; and amounts 
collected for another by a travel agent, real estate 
agent, advertising agent, conference management 
service provider, freight forwarder or customs 
broker. All other items, such as subcontractor costs, 
reimbursements for purchases a contractor makes at 
a customer’s request, investment income, and 
employee-based costs such as payroll taxes, may 
not be excluded from gross receipts. Subsection 
(c)(2) also adapts the methodology for calculating 
affiliate receipts from 13 CFR 121.104. 
10 Section 1106 of the CARES Act (15 U.S.C. 
9005) was redesignated as section 7A, transferred to 
the Small Business Act (15 U.S.C. 631 et seq.), and 
inserted so as to appear after section 7 of the Small 
Business Act (15 U.S.C. 636) in section 304(b) of the 
Economic Aid Act. 
11 Paragraph 7(a)(36)(D)(iii)(I) of the Small 
Business Act. 
12 Paragraph 7(a)(36)(D)(iv) of the Small Business 
Act. 
13 Paragraph 7(a)(37)(D) of the Small Business 
Act. 
14 Paragraph 7(a)(36)(D)(iii)(II) of the Small 
Business Act. 
15 See PPP FAQ #24 (posted April 13, 2020), 
available at https://www.sba.gov/sites/default/files/ 
2020-12/Final%20PPP%20FAQs%20%28December
%209%202020%29-508.pdf. 
16 Paragraph 7(a)(36)(D)(iv) of the Small Business 
Act (15 U.S.C. 636(a)(36)(D)(iv), as added by the 
CARES Act and amended by the Economic Aid Act, 
waived the affiliation rules contained in § 121.103 
for (1) any business concern with not more than 500 
employees that, as of the date on which the loan 
is disbursed, is assigned a NAICS code beginning 
with 72; (2) any business concern operating as a 
franchise that is assigned a franchise identifier code 
by SBA; (3) any business concern that receives 
financial assistance from a company licensed under 
section 301 of the Small Business Investment Act 
of 1958 (15 U.S.C. 681); and (4)(a) any business 
concern (including any station which broadcasts 
pursuant to a license granted by the Federal 
Communications Commission under title III of the 
Communications Act of 1934 (47 U.S.C. 301 et seq.) 
without regard for whether such a station is a 
concern as defined in 13 CFR 121.105, or any 
successor thereto) that employs not more than 500 
employees, or the size standard established by the 
Administrator for the NAICS code applicable to the 
business concern, per physical location of such 
business concern and is majority owned or 
controlled by a business concern that is assigned a 
NAICS code beginning with 511110 or 5151; or (b) 
any nonprofit organization that is assigned a NAICS 
code beginning with 5151. 
17 Paragraph 7(a)(36)(D)(iv) of the Small Business 
Act. 
experienced a reduction in annual 
receipts of 25 percent or greater in 2020 
compared to 2019 and the borrower 
submits copies of its annual tax forms 
substantiating the revenue decline. This 
provision will allow a borrower to 
provide annual tax return forms to 
substantiate its revenue reduction. The 
Administrator, in consultation with the 
Secretary of the Treasury (Secretary), 
has determined that this is necessary to 
improve administrability of Second 
Draw PPP Loans by providing borrowers 
an additional verifiable method for 
substantiating their revenue reduction. 
This method will be particularly 
important for small borrowers that may 
not have quarterly revenue information 
readily available. Moreover, this 
approach is appropriate because, if 
annual filings show a 25 percent 
revenue reduction, then at least one 
quarter in 2020 would have had at least 
a 25 percent revenue reduction. A 
borrower that did not experience a 25 
percent annual decline in revenues, or 
that was not in operation in all four 
quarters of 2019, may still meet the 
revenue reduction requirement under 
one of the quarterly measurements 
described above. 
The Economic Aid Act does not 
include a general definition of gross 
receipts for purposes of determining a 
borrower’s revenue reduction.8 
Subsection (c)(2) of the IFR defines 
gross receipts consistent with the 
definition of receipts in 13 CFR 121.104 
of SBA’s size regulations because this 
definition appropriately captures the 
type of income that is typically included 
in a small business’s gross receipts.9 
Moreover, this definition will enhance 
the administrability of Second Draw 
PPP Loans because it is a definition 
already used by the Administration and 
many small businesses. 
The IFR specifies that any forgiveness 
amount of a First Draw PPP Loan that 
a borrower received in calendar year 
2020 is excluded from a borrower’s 
gross receipts. Excluding the forgiveness 
amount from a borrower’s gross receipts 
is consistent with section 7A(i) of the 
Small Business Act, which expressly 
excludes PPP forgiveness amounts from 
being taxed as income.10 This 
clarification ensures the effectiveness of 
the second draw loan program by 
ensuring that a borrower is not 
disqualified from receiving a Second 
Draw PPP Loan because it received 
forgiveness on a First Draw PPP Loan. 
This furthers the purpose of the second 
draw loan provisions, which is to 
deliver additional aid to small 
businesses that previously received a 
First Draw PPP Loan. 
3. Business Concerns With More Than 
One Physical Location 
Under the CARES Act, any single 
business entity that is assigned a NAICS 
code beginning with 72 (including 
hotels and restaurants) and employs not 
more than 500 employees per physical 
location is eligible to receive a First 
Draw PPP Loan.11 In addition, as 
discussed below, under the 
Consolidated First Draw PPP IFR, SBA’s 
affiliation rules (13 CFR 121.301) do not 
apply to any business entity that is 
assigned a NAICS code beginning with 
72 and that employs not more than a 
total of 500 employees.12 As a result, if 
each hotel or restaurant location owned 
by a parent business is a separate legal 
business entity and employs not more 
than 500 employees, each hotel or 
restaurant location is permitted to apply 
for a separate PPP loan provided it uses 
its unique EIN. 
Section 317 of the Economic Aid Act 
modified this provision for Second 
Draw PPP Loans by reducing the limit 
on employees per physical location to 
300. Accordingly, a single business 
entity that is assigned a NAICS code 
beginning with 72 is eligible to receive 
a Second Draw PPP Loan if it employs 
no more than 300 employees per 
physical location and meets the revenue 
reduction requirements and otherwise 
satisfies the eligibility criteria described 
in this IFR.13 Under section 317 of the 
Economic Aid Act, the same standard 
applies to certain news organizations.14 
Subsections (c)(3) and (c)(4) of the IFR 
implement these statutory provisions. 
Borrowers may consult PPP Frequently 
Asked Question (FAQ) 24 15 for 
guidance on these standards for 
business concerns with more than one 
physical location, except that, for 
Second Draw PPP Loans, the number of 
employees per physical location is 
limited to 300 rather than 500. 
B. Affiliation Rules 
The same affiliation rules that apply 
to First Draw PPP Loans apply to 
Second Draw PPP Loans, except as 
provided in this IFR. As with First Draw 
PPP Loans, in most cases, a borrower is 
considered together with its affiliates to 
determine eligibility for the PPP.16 
However, the CARES Act waived the 
affiliation rules for certain categories of 
borrowers.17 Paragraph 7(a)(37)(E) of the 
Small Business Act, as amended by the 
Economic Aid Act, applies the same 
VerDate Sep<11>2014 
00:10 Jan 14, 2021
Jkt 253001
PO 00000
Frm 00024
Fmt 4701
Sfmt 4700
E:\FR\FM\14JAR6.SGM
14JAR6
khammond on DSKJM1Z7X2PROD with RULES6

3715 
Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations 
18 Paragraph 7(a)(37)(E) of the Small Business Act. 
19 See section (B)(3)(c) of the Consolidated First 
Draw PPP IFR. 
20 Paragraph 7(a)(37)(O) of the Small Business Act 
provides that a Second Draw PPP Loan may be 
made only to a borrower that received a First Draw 
PPP Loan under paragraph 7(a)(36). In addition, 
section 7(a)(37)(B) provides that the Administrator 
may guarantee covered loans to eligible entities 
under the same terms, conditions, and processes as 
First Draw PPP Loans. 
21 Paragraph 7(a)(37)(A)(iv)(III)(bb) of the Small 
Business Act. 
22 Paragraph 7(a)(37)(A)(iv)(III)(cc) of the Small 
Business Act. 
23 Paragraph 7(a)(37)(A)(iv)(III)(dd) of the Small 
Business Act. 
24 Paragraph 7(a)(37)(A)(iv)(III)(ee) of the Small 
Business Act. 
25 Section 322 of the Economic Aid Act. 
26 Section 342 of the Economic Aid Act. 
27 Paragraph 7(a)(37)(F) of the Small Business Act. 
28 Paragraph 7(a)(37)(C)(iv) of the Small Business 
Act. 
waivers to Second Draw PPP Loans, 
adds a waiver for certain eligible news 
organizations, and makes adjustments to 
reflect the reduced size requirement for 
Second Draw PPP Loans. Specifically, 
business concerns with a NAICS code 
beginning with 72 qualify for the 
affiliation waiver for Second Draw PPP 
Loans if they employ 300 or fewer 
employees. Eligible news organizations 
with a NAICS code beginning with 
511110 or 5151 (or majority-owned or 
controlled by a business concern with 
those NAICS codes) may qualify for the 
affiliation waiver for Second Draw PPP 
Loans only if they employ 300 or fewer 
employees per physical location.18 
Subsection (d)(2) implements these 
revised affiliation waivers. SBA also 
adopted a religious exemption to the 
affiliation rules by regulation,19 which 
applies to Second Draw PPP loans. 
C. Excluded Entities 
An entity that is ineligible to receive 
a First Draw PPP Loan under the CARES 
Act or Consolidated First Draw PPP IFR 
is also ineligible for a Second Draw PPP 
Loan.20 Subsection (e)(1) of the IFR 
implements this restriction. Subsection 
(e)(1) ensures that a borrower that 
received a First Draw PPP Loan despite 
being ineligible to receive the loan is not 
eligible to receive a Second Draw PPP 
Loan. 
The Economic Aid Act also prohibits 
several additional categories of 
borrowers from receiving a Second 
Draw PPP Loan under section 7(a)(37) of 
the Small Business Act. These 
categories of prohibited borrowers are 
listed in subsection (e) of the IFR: 
• A business concern or entity 
primarily engaged in political activities 
or lobbying activities, including any 
entity that is organized for research or 
for engaging in advocacy in areas such 
as public policy or political strategy or 
that describes itself as a think tank in 
any public documents; 21 
• certain entities organized under the 
laws of the People’s Republic of China 
or the Special Administrative Region of 
Hong Kong, or with other specified ties 
to the People’s Republic of China or the 
Special Administrative Region of Hong 
Kong; 22 
• any person required to submit a 
registration statement under section 2 of 
the Foreign Agents Registration Act of 
1938 (22 U.S.C. 612); 23 
• a person or entity that receives a 
grant for shuttered venue operators 
under section 324 of the Economic Aid 
Act; 24 
• entities in which the President, the 
Vice President, the head of an Executive 
department, or a Member of Congress, or 
the spouse of such person owns, 
controls, or holds at least 20 percent of 
any class of equity; 25 or 
• a publicly traded company, defined 
as an issuer, the securities of which are 
listed on an exchange registered as a 
national securities exchange under 
section 6 of the Securities Exchange Act 
of 1934 (15 U.S.C. 78f).26 
In addition, subsection (e)(9) of this IFR 
provides that an entity that has 
previously received a Second Draw PPP 
Loan may not receive another Second 
Draw PPP Loan, as required by the 
Economic Aid Act.27 Subsection (e)(9) 
also prohibits an entity that has 
permanently closed from receiving a 
Second Draw PPP Loan because 
paragraph 7(a)(37)(A)(iv) of the Small 
Business Act is best understood to 
describe existing businesses. The 
Administrator, in consultation with the 
Secretary, has determined this provision 
is also necessary to maintain program 
integrity, prevent abuse, and preserve 
the availability of Second Draw PPP 
Loan funds for businesses still in 
operation. Preserving funds for such 
businesses is necessary because only 
businesses that are still in operation will 
retain employees, which is a primary 
purpose of the PPP. A borrower that has 
temporarily closed or temporarily 
suspended its business remains eligible 
for a Second Draw PPP Loan. 
D. Payroll Cost Calculation 
In general, section 307 of the 
Economic Aid Act provides that the 
maximum loan amount for a Second 
Draw PPP Loan is equal to the lesser of 
two and half months of the borrower’s 
average monthly payroll costs or $2 
million. Relative to First Draw PPP 
loans, the Economic Aid Act adjusted 
the methodology for calculating a 
borrower’s payroll costs. Unlike First 
Draw PPP Loans, the Economic Aid Act 
provides that the relevant time period 
for calculating a borrower’s payroll costs 
for a Second Draw PPP Loan is either 
the twelve-month period prior to when 
the loan is made or calendar year 2019. 
The Act also provided tailored 
methodologies for certain categories of 
borrowers. These calculations are 
reflected in subsection (f) of this IFR. 
Subsection (f) of the IFR uses ‘‘calendar 
year 2020’’ to refer to ‘‘the twelve-month 
period prior to when the loan is made.’’ 
Calculating payroll costs based on 
calendar year 2020 rather than the 
twelve months preceding the date the 
loan is made will simplify the 
calculations and documentation 
requirements for borrowers because 
payroll records are more commonly 
created and retained on a calendar-year 
basis. Allowing borrowers to calculate 
payroll costs based on calendar year 
2020 is also not expected to result in a 
significant difference in payroll costs 
compared to the twelve months 
preceding the date the loan is made 
because all Second Draw PPP Loans will 
be made in the first quarter of 2021. 
However, the rule notes that Second 
Draw PPP Loan borrowers who are not 
self-employed (including sole 
proprietorships and independent 
contractors) are also permitted to use 
the precise 1-year period before the date 
on which the loan is made to calculate 
payroll costs if they choose not to use 
2019 or 2020 to calculate payroll costs. 
Consistent with the Economic Aid 
Act, subsections (f)(3) and (f)(4) of the 
IFR include tailored calculation 
methodologies for seasonal businesses, 
new entities that did not exist for the 
full twelve-month period preceding the 
Second Draw PPP Loan, and borrowers 
assigned a NAICS code beginning with 
72 at the time of disbursement. For 
borrowers assigned a NAICS code 
beginning with 72 at the time of 
disbursement, the Economic Aid Act 
provides that the maximum loan 
amount is equal to three-and-a-half (3.5) 
months of payroll costs rather than two- 
and-a-half (2.5) months.28 These 
subsections also provide that, for a 
borrower with a NAICS code beginning 
with 72 that would fall into more than 
one category listed in subsection (f) (for 
example, a business with a NAICS code 
beginning with 72 that is also a seasonal 
business or is also a new entity without 
12 months of payroll costs), the 
borrower may calculate its average 
monthly payroll costs based on the 
methodology that applies to the entity 
but may use the 3.5 multiplier 
VerDate Sep<11>2014 
00:10 Jan 14, 2021
Jkt 253001
PO 00000
Frm 00025
Fmt 4701
Sfmt 4700
E:\FR\FM\14JAR6.SGM
14JAR6
khammond on DSKJM1Z7X2PROD with RULES6

3716 
Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations 
29 See subsections (B)(4)(b) and (B)(4)(e) of the 
Consolidated First Draw PPP IFR. 
30 See paragraph 7(a)(37)(I)(i) of the Small 
Business Act. 
31 Paragraph 7(a)(37)(N) of the Small Business 
Act. 
32 85 FR 33010, 33012. 
applicable to businesses with a NAICS 
code beginning with 72. The 
Administrator, in consultation with the 
Secretary, has determined that this 
methodology is necessary to provide 
small businesses in the accommodation 
and food services sector the full amount 
of relief provided in the Economic Aid 
Act while allowing these borrowers to 
calculate their average monthly payroll 
costs accurately. 
The Economic Aid Act included a 
new payroll cost calculation for farmers 
and ranchers receiving First Draw PPP 
Loans. However, it did not specify how 
payroll costs should be calculated for 
Second Draw PPP Loans to farmers and 
ranchers. This IFR clarifies that the 
same general calculation for farmers and 
ranchers applicable to First Draw PPP 
Loans applies to Second Draw PPP 
Loans, with adjustments that (i) 
eliminate the provision for refinancing 
of an Economic Injury Disaster Loan 
(EIDL), which does not apply to Second 
Draw PPP Loans, and (ii) apply the 
choice of time period for calculating a 
farmer’s or rancher’s payroll costs for 
Second Draw PPP Loans, consistent 
with other Second Draw PPP Loans. 
This IFR also specifies that, in 
calculating a farmer’s or rancher’s 
maximum loan amount, any employee 
payroll costs should be subtracted from 
the farmer’s or rancher’s gross income to 
avoid double-counting amounts that 
represent pay to the employees of the 
farmer or rancher. 
Subsections (f)(7) and (f)(8) of the IFR 
include tailored calculation 
methodologies for self-employed 
individuals and partnerships. These 
methodologies are based on the 
corresponding methodologies for self- 
employed individuals and partnerships 
that are used for First Draw PPP 
Loans.29 These methodologies have 
been adjusted to eliminate the provision 
for refinancing of an EIDL loan, which 
does not apply to Second Draw PPP 
loans and to apply the choice of time 
period for calculating payroll costs, 
consistent with other Second Draw PPP 
loans. 
Finally, subsection (f)(9) provides that 
businesses that are part of a single 
corporate group shall in no event 
receive more than $4,000,000 of Second 
Draw PPP Loans in the aggregate. The 
Administrator, in consultation with the 
Secretary, determined that limiting the 
amount of Second Draw PPP Loans that 
a single corporate group may receive 
will promote the availability of PPP 
loans to the largest possible number of 
borrowers, consistent with the CARES 
and Economic Aid Act. The 
Administrator has concluded that a 
limitation of $4,000,000 is appropriate 
because it is proportional to the 
$20,000,000 maximum amount for 
corporate groups that is provided under 
the Consolidated First Draw PPP IFR 
when the maximum loan amount for a 
single PPP loan is $10,000,000. 
E. Second Draw PPP Loan Application 
and Documentation Requirements 
Subsection (g) of this IFR includes the 
application and documentation 
requirements for Second Draw PPP 
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 (i) 
used calendar year 2019 figures to 
determine its First Draw PPP Loan 
amount, (ii) used calendar year 2019 
figures to determine its Second Draw 
PPP Loan amount (instead of calendar 
year 2020), and (iii) the lender for the 
applicant’s Second Draw PPP Loan is 
the same as the lender that made the 
applicant’s First Draw PPP Loan. In 
such cases, additional documentation is 
not required because the lender already 
has the relevant documentation 
supporting the borrower’s payroll costs. 
The lender may request additional 
documentation, however, if on further 
review the lender concludes that it 
would be useful in conducting the 
lender’s good-faith review of the 
borrower’s loan amount calculation. 
For loans with a principal amount 
greater than $150,000, the applicant 
must also submit documentation 
adequate to establish that the applicant 
experienced a revenue reduction of 25% 
or greater in 2020 relative to 2019. (The 
revenue reduction requirement is 
addressed in subsection (c)(1)(iv) of this 
IFR.) Such documentation may include 
relevant tax forms, including annual tax 
forms, or, if relevant tax forms are not 
available, quarterly financial statements 
or bank statements. For loans with a 
principal amount of $150,000 or less, 
such documentation is not required at 
the time the borrower submits its 
application for a loan, but must be 
submitted on or before the date the 
borrower applies for loan forgiveness, as 
required under the Economic Aid Act.30 
If a borrower does not submit an 
application for loan forgiveness, such 
documentation must be provided upon 
SBA’s request. 
F. Lender Requirements 
Subsection (g) of this IFR contains the 
provisions specific to lenders for 
Second Draw PPP Loans. Paragraph 
7(a)(37)(K) of the Small Business Act, 
added by the Economic Aid Act, states 
that a lender approved to make First 
Draw PPP loans may make Second Draw 
PPP Loans under the same terms and 
conditions as new First Draw PPP 
Loans. Subsection (g)(2) of this IFR 
provides that lenders are subject to the 
same requirements when making 
Second Draw PPP Loans as when they 
are making First Draw PPP Loans. These 
provisions allow a lender approved to 
make Second Draw PPP Loans to use 
existing program guidance and standard 
operating procedures to the maximum 
extent practicable.31 The requirements 
applicable to PPP lenders are in sections 
(C) and (D) of the Consolidated First 
Draw PPP IFR. If a borrower has not 
submitted new payroll documentation 
with its Second Draw PPP Loan 
application because it previously 
submitted 2019 payroll information to 
the same lender when it applied for its 
First Draw PPP Loan, then the lender 
must confirm the borrower’s average 
monthly payroll costs based on that 
prior documentation. 
In addition, for a Second Draw PPP 
Loan greater than $150,000, the lender 
must confirm the dollar amount and 
percentage of the borrower’s revenue 
reduction by performing a good faith 
review, in a reasonable time, of the 
borrower’s calculations and supporting 
documents concerning the borrower’s 
revenue reduction. If the lender 
identifies errors in the borrower’s 
calculation or a material lack of 
substantiation in the borrower’s 
supporting documents, the lender 
should work with the borrower to 
remedy the issue. 
G. Loans to Borrowers With Unresolved 
First Draw PPP Loans 
As described in SBA’s interim final 
rule on SBA Loan Review Procedures 
and Related Borrower and Lender 
Responsibilities, SBA may review any 
PPP loan, as the Administrator deems 
appropriate.32 Subsection (i) of the IFR 
establishes procedures relating to the 
handling of a Second Draw PPP Loan 
application by a borrower whose First 
Draw PPP Loan is under review by SBA 
(‘‘unresolved borrower’’). If a borrower’s 
First Draw PPP loan is under review by 
SBA and/or information in SBA’s 
possession indicates that the borrower 
may have been ineligible for the First 
VerDate Sep<11>2014 
00:10 Jan 14, 2021
Jkt 253001
PO 00000
Frm 00026
Fmt 4701
Sfmt 4700
E:\FR\FM\14JAR6.SGM
14JAR6
khammond on DSKJM1Z7X2PROD with RULES6

3717 
Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations 
33 All terms in this subsection have the same 
definitions as in sections 7(a)(36) and (37) of the 
Small Business Act and the Consolidated First 
Draw PPP IFR, as applicable. 
34 A lender must make disbursement of the loan 
within ten calendar days of loan approval. See 
subsection (D)(7) of the Consolidated First Draw 
PPP IFR. 
Draw PPP Loan it received or for the 
loan amount it received, the lender will 
receive notification from SBA when the 
lender submits an application for a 
guaranty of a Second Draw PPP Loan 
and will not receive an SBA loan 
number until the issue related to the 
unresolved borrower’s First Draw PPP 
Loan is resolved. SBA will resolve 
issues related to unresolved borrowers 
expeditiously. These procedures are 
designed to promote compliance with 
the eligibility requirements for Second 
Draw PPP Loans by preventing 
additional loans from being made to 
borrowers that were not eligible for a 
First Draw PPP Loan or received an 
impermissible loan amount. At the same 
time, these procedures do not disqualify 
an eligible unresolved borrower from 
receiving a Second Draw PPP Loan, in 
recognition that many flags will be 
resolved in the borrower’s favor. The 
Administrator, in consultation with the 
Secretary, has determined that these 
procedures strike an appropriate 
balance between promoting program 
integrity and preventing abuse, while 
making Second Draw PPP Loans 
available to all eligible borrowers as 
expeditiously as possible. SBA will set 
aside available appropriations to fund 
Second Draw PPP Loans applied for by 
unresolved borrowers in the event they 
are approved. 
H. Loan Forgiveness 
Loan forgiveness of Second Draw PPP 
Loans and the loan review process for 
Second Draw PPP Loans are generally 
subject to the interim final rules 
regarding Loan Forgiveness and SBA 
Loan Review Procedures and Related 
Borrower and Lender Responsibilities, 
as modified to conform to the Economic 
Aid Act by the Consolidated First Draw 
PPP IFR, which is being published 
concurrently with this IFR. Subsection 
(j) contains forgiveness provisions 
specific to Second Draw PPP loans. 
Table of Contents 
(a) Second Draw PPP Loan Program 
(b) What requirements apply to Second Draw 
PPP Loans? 
(c) Who is eligible for a Second Draw PPP 
Loan? 
(d) How do SBA’s affiliation rules affect an 
applicant’s eligibility for a Second Draw 
PPP Loan? 
(e) Who is not eligible for a Second Draw PPP 
Loan? 
(f) What is the maximum loan amount for a 
Second Draw PPP Loan? 
(g) How do I submit an application for a 
Second Draw PPP Loan and what 
documentation must I provide to 
demonstrate eligibility? 
(h) What do lenders need to know and do? 
(i) Will an applicant’s Second Draw PPP 
Loan application be affected if there are 
unresolved issues regarding the 
applicant’s First Draw PPP Loan? 
(j) Are Second Draw PPP Loans eligible for 
loan forgiveness? 
IV. Paycheck Protection Program 
Second Draw Loans 
(a) Second Draw PPP Loan Program 
Under section 7(a)(37) of the Small 
Business Act (15 U.S.C. 636(a)(37)), SBA 
is authorized to guarantee Paycheck 
Protection Program Second Draw Loans 
(‘‘Second Draw PPP Loans’’). 
(b) What requirements apply to Second 
Draw PPP Loans? 
(1) Second Draw PPP Loans are 
subject to SBA’s and the Department of 
the Treasury’s (‘‘Treasury’s’’) 
consolidated interim final rule 
implementing the Paycheck Protection 
Program (‘‘Consolidated First Draw PPP 
IFR’’) and all PPP loan program 
requirements, except as otherwise 
provided in this section, including but 
not limited to the following terms: 
(i) The guarantee percentage is 100 
percent. 
(ii) No collateral will be required. 
(iii) No personal guarantees will be 
required. 
(iv) The interest rate will be 100 basis 
points or one percent, calculated on a 
non-compounding, non-adjustable basis. 
(v) The maturity is five years. 
(vi) All loans will be processed by all 
lenders under delegated authority and 
lenders will be permitted to rely on 
certifications of the borrower in order to 
determine eligibility of the borrower 
and the use of loan proceeds. 
(2) Frequently Asked Questions and 
other guidance issued by SBA or by 
SBA in consultation with the 
Department of the Treasury with respect 
to PPP loans under section 7(a)(36) of 
the Small Business Act (15 U.S.C. 
636(a)(36)) (‘‘First Draw PPP Loans’’) 
apply to Second Draw PPP Loans, 
except as otherwise provided in this 
section. 
(c) Who is eligible for a Second Draw 
PPP Loan? 
Subject to subsection (e) of this 
section, below, the following applicants 
are eligible for Second Draw PPP Loans: 
(1) An applicant is eligible for a 
Second Draw PPP Loan if it is a 
business concern, independent 
contractor, eligible self-employed 
individual, sole proprietor, nonprofit 
organization eligible for a First Draw 
PPP Loan, veterans organization, Tribal 
business concern, housing cooperative, 
small agricultural cooperative, eligible 
501(c)(6) organization or destination 
marketing organization, or an eligible 
nonprofit news organization 33 that: 
(i) Previously received a First Draw 
PPP loan in accordance with the 
eligibility criteria in the Consolidated 
First Draw PPP IFR; 
(ii) has used, or will use, the full 
amount of its First Draw PPP Loan 
(including the amount of any increase 
on such First Draw PPP Loan) on 
authorized uses under subsection 
(B)(11) of the Consolidated First Draw 
PPP IFR on or before the expected date 
on which the Second Draw PPP Loan 
will be disbursed; 34 
(iii) employs not more than 300 
employees, unless it satisfies the 
alternative criteria for businesses with a 
North American Industry Classification 
System (‘‘NAICS’’) code beginning with 
72 and eligible news organizations with 
more than one physical location 
described in subsection (c)(3) or (c)(4) of 
this section; and 
(iv) (A) experienced a reduction in 
revenue in calendar year 2020, 
measured as follows: 
(1) the applicant had gross receipts 
during the first, second, third, or fourth 
quarter in 2020 that demonstrate at least 
a 25 percent reduction from the 
applicant’s gross receipts during the 
same quarter in 2019 (for example, an 
applicant that had gross receipts of 
$50,000 in the second quarter of 2019 
and had gross receipts of $30,000 in the 
second quarter of 2020 experienced a 40 
percent revenue reduction between 
these two quarters); 
(2) if the applicant was not in 
business during the first or second 
quarter of 2019, but was in business 
during the third and fourth quarters of 
2019, the applicant had gross receipts 
during the first, second, third, or fourth 
quarter of 2020 that demonstrate at least 
a 25 percent reduction from the 
applicant’s gross receipts during the 
third or fourth quarter of 2019 (for 
example, an applicant that had gross 
receipts of $50,000 in the third quarter 
of 2019 and had gross receipts of 
$30,000 in the third quarter of 2020– 
demonstrating a reduction of 40 percent 
from the applicant’s gross receipts 
during the third quarter in 2019); 
(3) if the applicant was not in 
business during the first, second, or 
third quarter of 2019, but was in 
business during the fourth quarter of 
2019, the applicant had gross receipts 
VerDate Sep<11>2014 
00:10 Jan 14, 2021
Jkt 253001
PO 00000
Frm 00027
Fmt 4701
Sfmt 4700
E:\FR\FM\14JAR6.SGM
14JAR6
khammond on DSKJM1Z7X2PROD with RULES6

3718 
Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations 
35 See generally section (B)(2) of the Consolidated 
First Draw PPP IFR. 
during the first, second, third, or fourth 
quarter of 2020 that demonstrate at least 
a 25 percent reduction from the fourth 
quarter of 2019 (for example, an 
applicant that had gross receipts of 
$50,000 in the fourth quarter of 2019 
and had gross receipts of $30,000 in the 
fourth quarter of 2020–demonstrating a 
reduction of 40 percent from the 
applicant’s gross receipts during the 
fourth quarter in 2019); or 
(4) if the applicant was not in 
business during 2019, but was in 
operation on February 15, 2020, the 
applicant had gross receipts during the 
second, third, or fourth quarter of 2020 
that demonstrate at least a 25 percent 
reduction from the gross receipts of the 
entity during the first quarter of 2020 
(for example, an applicant that had 
gross receipts of $50,000 in the first 
quarter of 2020 and had gross receipts 
of $30,000 in the fourth quarter of 
2020—demonstrating a reduction of 40 
percent from the applicant’s gross 
receipts during the first quarter in 2020). 
(B) An applicant that was in operation 
in all four quarters of 2019 is deemed to 
have experienced the revenue reduction 
in subsection (c)(1)(iv)(A)(1) if it 
experienced a reduction in annual 
receipts of 25 percent or greater in 2020 
compared to 2019 and the borrower 
submits copies of its annual tax forms 
substantiating the revenue decline. 
(2)(i) Gross receipts includes all 
revenue in whatever form received or 
accrued (in accordance with the entity’s 
accounting method) from whatever 
source, including from the sales of 
products or services, interest, dividends, 
rents, royalties, fees, or commissions, 
reduced by returns and allowances. 
Generally, receipts are considered ‘‘total 
income’’ (or in the case of a sole 
proprietorship, independent contractor, 
or self-employed individual ‘‘gross 
income’’) plus ‘‘cost of goods sold,’’ and 
excludes net capital gains or losses as 
these terms are defined and reported on 
IRS tax return forms. Gross receipts do 
not include the following: Taxes 
collected for and remitted to a taxing 
authority if included in gross or total 
income (such as sales or other taxes 
collected from customers and excluding 
taxes levied on the concern or its 
employees); proceeds from transactions 
between a concern and its domestic or 
foreign affiliates; and amounts collected 
for another by a travel agent, real estate 
agent, advertising agent, conference 
management service provider, freight 
forwarder or customs broker. All other 
items, such as subcontractor costs, 
reimbursements for purchases a 
contractor makes at a customer’s 
request, investment income, and 
employee-based costs such as payroll 
taxes, may not be excluded from gross 
receipts. 
(ii) Gross receipts of affiliates are 
calculated as follows: 
(A) Gross receipts of a borrower with 
affiliates is calculated by adding the 
gross receipts of the business concern 
with the gross receipts of each affiliate. 
(B) If a borrower has acquired an 
affiliate or been acquired as an affiliate 
during 2020, gross receipts includes the 
receipts of the acquired or acquiring 
concern. This aggregation applies for the 
entire period of measurement, not just 
the period after the affiliation arose. 
However, if a concern acquired a 
segregable division of another business 
concern during 2020, gross receipts do 
not include the receipts of the acquired 
division prior to the acquisition. 
(C) The gross receipts of a former 
affiliate are not included. This exclusion 
of gross receipts of such former affiliate 
applies during the entire period of 
measurement, rather than only for the 
period after which affiliation ceased. 
However, if a borrower sold a segregable 
division during 2020, the gross receipts 
will continue to include the receipts of 
the division that was sold. 
(D) All terms in this subsection shall 
have the meaning attributed to them by 
the IRS. 
(iii) For an eligible nonprofit 
organization, a veterans organization, an 
eligible nonprofit news organization, an 
eligible 501(c)(6) organization, or 
eligible destination marketing 
organization, gross receipts means gross 
receipts within the meaning of section 
6033 of the Internal Revenue Code of 
1986. 
(iv) The amount of any forgiven First 
Draw PPP Loan shall not be included 
toward any borrower’s gross receipts. 
(3) Any business concern that has 
more than one physical location and 
that employs not more than 300 
employees per physical location is 
eligible to receive a Second Draw PPP 
Loan if it is assigned a NAICS code 
beginning with 72 at the time of loan 
disbursement and otherwise meets the 
eligibility criteria in subsection (c)(1). 
(4) Any business concern, or any 
station which broadcasts pursuant to a 
license granted by the Federal 
Communications Commission under 
title III of the Communications Act of 
1934 (47 U.S.C. 301 et seq.), that has 
more than one physical location and 
that employs not more than 300 
employees per physical location is 
eligible to receive a Second Draw PPP 
Loan if it meets the eligibility criteria in 
subsection (c)(1) and: (1) Is majority 
owned or controlled by a business 
concern that is assigned a NAICS code 
beginning with 511110 or 5151 or, with 
respect to a public broadcasting entity 
(as defined in section 397(11) of the 
Communications Act of 1934 (47 U.S.C. 
397(11))), has a trade or business that 
falls under such a code; and (2) makes 
a good faith certification that proceeds 
of the loan will be used to support 
expenses at the component of the 
organization that produces or distributes 
locally focused or emergency 
information. 
(d) How do SBA’s affiliation rules affect 
an applicant’s eligibility for a Second 
Draw PPP Loan? 
(1) Eligibility for Second Draw PPP 
Loans is governed by the same 
affiliations rules (and waivers) as First 
Draw PPP Loans, except as described in 
subsection (d)(2). 
(2) The affiliation rules under 13 CFR 
121.301(f) are waived with respect to 
eligibility for a Second Draw PPP Loan 
for: 
(i) Any business concern with not 
more than 300 employees that, as of the 
date on which the covered loan is 
disbursed, is assigned a NAICS code 
beginning with 72; and 
(ii) (A) any business concern 
(including any station which broadcasts 
pursuant to a license granted by the 
Federal Communications Commission 
under title III of the Communications 
Act of 1934 (47 U.S.C. 301 et seq.) 
without regard for whether such a 
station is a concern as defined in 13 
CFR 121.105, or any successor thereto) 
that employs not more than 300 
employees, per physical location of 
such business concern and is majority 
owned or controlled by a business 
concern that is assigned a NAICS code 
beginning with 511110 or 5151; or 
(B) any nonprofit organization that is 
assigned a NAICS code beginning with 
5151. 
(e) Who is not eligible for a Second 
Draw PPP Loan? 
An applicant is not eligible for a 
Second Draw PPP Loan, even if it meets 
the eligibility requirements of 
subsection (c) of this section, if the 
applicant is: 
(1) Excluded from eligibility under 
the Consolidated First Draw PPP IFR; 35 
(2) a business concern or entity 
primarily engaged in political activities 
or lobbying activities, as defined in 
section 3 of the Lobbying Disclosure Act 
of 1995 (2 U.S.C. 1602), including any 
entity that is organized for research or 
for engaging in advocacy in areas such 
as public policy or political strategy or 
VerDate Sep<11>2014 
00:10 Jan 14, 2021
Jkt 253001
PO 00000
Frm 00028
Fmt 4701
Sfmt 4700
E:\FR\FM\14JAR6.SGM
14JAR6
khammond on DSKJM1Z7X2PROD with RULES6

3719 
Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations 
36 Second Draw PPP Loan borrowers who are not 
self-employed, sole proprietorships, or independent 
contractors are also permitted to use the precise 1- 
year period before the date on which the loan is 
made to calculate payroll costs if they choose not 
to use 2019 or 2020. Since most borrowers will use 
2019 or 2020 the rule text refers only to 2019 or 
2020 for simplicity and readability. 
otherwise describes itself as a think tank 
in any public documents; 
(3) any business concern or entity: 
(i) For which an entity created in or 
organized under the laws of the People’s 
Republic of China or the Special 
Administrative Region of Hong Kong, or 
that has significant operations in the 
People’s Republic of China or the 
Special Administrative Region of Hong 
Kong, owns or holds, directly or 
indirectly, not less than 20 percent of 
the economic interest of the business 
concern or entity, including as equity 
shares or a capital or profit interest in 
a limited liability company or 
partnership; or 
(ii) that retains, as a member of the 
board of directors of the business 
concern, a person who is a resident of 
the People’s Republic of China; 
(4) any person required to submit a 
registration statement under section 2 of 
the Foreign Agents Registration Act of 
1938 (22 U.S.C. 612); 
(5) any person or entity that receives 
a grant for shuttered venue operators 
under section 324 of the Economic Aid 
to Hard-Hit Small Businesses, 
Nonprofits, and Venues Act; 
(6) any entity in which the President, 
the Vice President, the head of an 
Executive department, or a Member of 
Congress, or the spouse of such person 
as determined under applicable 
common law, directly or indirectly 
holds a controlling interest in the entity, 
where: 
(i) ‘‘controlling interest’’ means 
owning, controlling, or holding not less 
than 20 percent, by vote or value, of the 
outstanding amount of any class of 
equity interest in an entity; 
(ii) ‘‘equity interest’’ means: 
(A) A share in an entity, without 
regard to whether the share is 
transferable or classified as stock or 
anything similar; 
(B) a capital or profit interest in a 
limited liability company or 
partnership; or 
(C) a warrant or right, other than a 
right to convert, to purchase, sell, or 
subscribe to a share or interest described 
in (A) or (B), respectively; 
(iii) ‘‘Executive department’’ has the 
meaning given the term in section 101 
of title 5, United States Code; 
(iv) ‘‘Member of Congress’’ means a 
Member of the Senate or House of 
Representatives, a Delegate to the House 
of Representatives, and the Resident 
Commissioner from Puerto Rico; and 
(v) For the purpose of determining 
whether a person has a controlling 
interest in the entity, the securities 
owned, controlled, or held by the 
President, the Vice President, the head 
of an Executive department, or a 
Member of Congress, shall be aggregated 
with the securities held by his or her 
spouse as determined under applicable 
common law; 
(7) any issuer, the securities of which 
are listed on an exchange registered as 
a national securities exchange under 
section 6 of the Securities Exchange Act 
of 1934 (15 U.S.C. 78f), where the terms 
‘‘exchange,’’ ‘‘issuer,’’ and ‘‘security’’ 
have the meanings given those terms in 
section 3(a) of the Securities Exchange 
Act of 1934 (15 U.S.C. 78c(a)) (except 
SBA will not consider whether a news 
organization that is eligible under 
subsection (c)(4) is affiliated with an 
entity, which includes any entity that 
owns or controls such news 
organization, that is an issuer); 
(8) an entity that has previously 
received a Second Draw PPP Loan; or 
(9) an entity that has permanently 
closed. 
(f) What is the maximum loan amount 
for a Second Draw PPP Loan? 
(1) In general, the maximum loan 
amount for a Second Draw PPP Loan is 
equal to the lesser of two and half 
months of the borrower’s average 
monthly payroll costs or $2 million, 
except as otherwise specified in this 
subsection (e). A borrower’s average 
monthly payroll costs may be based on 
calendar year 2020, calendar year 
2019,36 or as otherwise specified in 
subsections (f)(2) through (f)(9) of this 
section. ‘‘Payroll costs’’ has the same 
meaning as in subsections (B)(4)(g) and 
(B)(4)(h) of the Consolidated First Draw 
PPP IFR and is calculated in the same 
manner. In calculating a borrower’s 
payroll costs, the borrower must 
subtract any compensation paid to an 
employee in excess of $100,000 on an 
annualized basis, as prorated for the 
time period during which the payments 
are made or the obligation to make the 
payments is incurred. 
(2) Except as otherwise provided in 
subsection (f)(3) through (f)(7), the 
maximum amount of a Second Draw 
PPP Loan is calculated as the lesser of: 
(i) The product obtained by 
multiplying: 
(A) The average total monthly 
payment for payroll costs incurred or 
paid by the borrower during 2019 or 
2020 (at the election of the borrower); by 
(B) 2.5; or 
(ii) $2,000,000. 
(3) The maximum amount of a Second 
Draw PPP Loan to a borrower that is a 
seasonal employer (meaning an 
employer that does not operate for more 
than 7 months in any calendar year or 
that during the preceding calendar year, 
had gross receipts for any 6 months of 
that year that were not more than 33.33 
percent of the gross receipts of the 
employer for the other 6 months of that 
year) is calculated as the lesser of: 
(i) The product obtained by 
multiplying: 
(A) At the election of the borrower, 
the average total monthly payments for 
payroll costs incurred or paid by the 
borrower for any 12-week period 
between February 15, 2019 and 
February 15, 2020; by 
(B) 2.5 (or, only for a borrower 
assigned a NAICS code beginning with 
72 at the time of disbursement as 
defined in subsection (f)(10), 3.5); or 
(ii) $2,000,000. 
(4) The maximum amount of a Second 
Draw PPP Loan to a borrower that did 
not exist during the 1-year period 
preceding February 15, 2020, but was in 
operation on February 15, 2020 (‘‘new 
entity’’), is calculated as the lesser of: 
(i) The product obtained by 
multiplying: 
(A) The quotient obtained by 
dividing: 
(1) The sum of the total monthly 
payments by the borrower for payroll 
costs paid or incurred by the borrower 
as of the date on which the borrower 
applies for the Second Draw PPP Loan; 
by 
(2) the number of months in which 
those payroll costs were paid or 
incurred; by 
(B) 2.5 (or, only for a borrower 
assigned a NAICS code beginning with 
72 at the time of disbursement as 
defined in subsection (f)(10), 3.5); or 
(ii) $2,000,000. 
(5) The maximum amount of a Second 
Draw PPP Loan made to a borrower 
assigned a NAICS code beginning with 
72 at the time of disbursement as 
defined in subsection (f)(10) (that is not 
a seasonal employer or new entity 
addressed in subsection (f)(3) or (f)(4) or 
a borrower with self-employment 
income or a partnership addressed in 
subsection (f)(7) or (f)(8) of this section) 
is calculated as the lesser of: 
(i) The product obtained by 
multiplying: 
(A) The average total monthly 
payment for payroll costs incurred or 
paid by the borrower during either 2019 
or 2020 (at the borrower’s election) by 
(B) 3.5; or 
(ii) $2,000,000. 
(6) (i) The maximum amount of a 
Second Draw PPP Loan to a farmer or 
rancher that: 
VerDate Sep<11>2014 
00:10 Jan 14, 2021
Jkt 253001
PO 00000
Frm 00029
Fmt 4701
Sfmt 4700
E:\FR\FM\14JAR6.SGM
14JAR6
khammond on DSKJM1Z7X2PROD with RULES6

3720 
Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations 
37 This treatment follows the computation of self- 
employment tax from IRS Form 1040 Schedule SE 
Section A line 4 and removes the ‘‘employer’’ share 
of self-employment tax, consistent with how payroll 
costs for employees in the partnership are 
determined. 
(A) Operates as a sole proprietorship 
or as an independent contractor, or is an 
eligible self-employed individual; 
(B) reports farm income or expenses 
on a Schedule F (IRS Form 1040); and 
(C) was in business as of February 15, 
2020; is calculated according to (ii) or 
(iii) of this subsection(e)(6), depending 
on whether the borrower has employees. 
(ii) If a borrower meeting the criteria 
in subsection (6)(i) of this section does 
not have any employees, the maximum 
loan amount is the product obtained by 
multiplying: 
(A) The gross income of the borrower 
in 2019 or 2020, as reported on a 
Schedule F (IRS Form 1040), that is not 
more than $100,000, divided by 12; and 
(B) 2.5. 
(iii) If a borrower meeting the criteria 
in subsection (6)(i) of this section has 
employees, the maximum loan amount 
is calculated as the lesser of: 
(A) The product obtained by 
multiplying: 
(1) The sum of (i) the difference 
between gross income and employee 
payroll costs of the borrower in 2019 or 
2020 (at the election of the borrower), as 
reported on a Schedule F (IRS Form 
1040), that is not more than $100,000, 
divided by 12, and (ii) the average total 
monthly payment for employee payroll 
costs incurred or paid by the borrower 
during the same year elected by the 
borrower; by 
(2) 2.5; or 
(B) $2,000,000. 
(7) The maximum amount of a Second 
Draw PPP Loan to a borrower that has 
income from self-employment and files 
a Form 1040, Schedule C, is calculated 
as follows, depending on whether the 
borrower has employees: 
(i) For a borrower that has income 
from self-employment and does not 
have any employees, the maximum loan 
amount is the lesser of: 
(A) The product obtained by 
multiplying: 
(1) The net profit of the borrower in 
2019 or 2020, as reported on IRS Form 
1040 Schedule C, that is not more than 
$100,000, divided by 12; and 
(2) 2.5 (or, only for a borrower 
assigned a NAICS code beginning with 
72 as defined in subsection (f)(10) at the 
time of disbursement, 3.5). 
(ii) For a borrower that has income 
from self-employment and has 
employees, the maximum loan amount 
is the lesser of: 
(A) The product obtained by 
multiplying: 
(1) The sum of (i) the net profit of the 
borrower in 2019 or 2020 (at the 
election of the borrower), as reported on 
IRS Form 1040 Schedule C, that is not 
more than $100,000, divided by 12; (ii) 
the average total monthly payment for 
employee payroll costs incurred or paid 
by the borrower during the same year 
elected by the borrower; by 
(2) 2.5 (or, only for a borrower 
assigned a NAICS code beginning with 
72 at the time of disbursement as 
defined in subsection (f)(10), 3.5); or 
(B) $2,000,000. 
(8) The maximum amount of a Second 
Draw PPP Loan to a borrower that files 
taxes as a partnership is calculated as 
the lesser of: 
(i) The product obtained by 
multiplying: 
(A) The sum of (1) net earnings from 
self-employment of individual general 
partners in 2019 or 2020 (at the election 
of the borrower), as reported on IRS 
Form 1065 K–1, reduced by section 179 
expense deduction claimed, 
unreimbursed partnership expenses 
claimed, and depletion claimed on oil 
and gas properties, multiplied by 
0.9235,37 that is not more than 
$100,000, divided by 12; (2) the average 
total monthly payment for employee 
payroll costs incurred or paid by the 
borrower during the same year elected 
by the borrower; by 
(B) 2.5 (or, only for a borrower 
assigned a NAICS code beginning with 
72 as defined in subsection (f)(10) at the 
time of disbursal, 3.5); or 
(ii) $2,000,000. 
(9) Businesses that are part of a single 
corporate group shall in no event 
receive more than $4,000,000 of Second 
Draw PPP Loans in the aggregate. 
Corporate group has the same meaning 
as in subsection (B)(4)(f) of the 
Consolidated First Draw PPP IFR. 
(10) For purposes of calculating a 
borrower’s maximum payroll costs, a 
borrower may multiply its average 
monthly payroll costs by 3.5 only if the 
borrower is in the Accommodation and 
Food Services sector and has reported a 
NAICS code beginning with 72 as its 
business activity code on its most recent 
IRS income tax return. 
(g) How do I submit an application for 
a Second Draw PPP Loan and what 
documentation must I provide to 
demonstrate eligibility? 
(1) The applicant must submit to the 
lender SBA Form 2483–SD (Paycheck 
Protection Program Second Draw 
Borrower Application Form) or the 
lender’s equivalent form including the 
required certifications and the 
documentation in subsection (g)(2). 
(2) At the time an applicant submits 
its loan application form, it must submit 
the following unless the documentation 
was submitted to the lender for the First 
Draw PPP Loan (i.e., the applicant used 
calendar year 2019 figures to determine 
both its First Draw PPP Loan amount 
and its Second Draw PPP Loan amount, 
and the lender for the applicant’s 
Second Draw PPP Loan is the same as 
the lender that made the applicant’s 
First Draw PPP Loan): 
(i) If the applicant is not self- 
employed, the applicant’s Form 941 (or 
other tax forms containing similar 
information) and state quarterly wage 
unemployment insurance tax reporting 
forms from each quarter in 2019 or 2020 
(whichever was used to calculate 
payroll), as applicable, or equivalent 
payroll processor records, along with 
evidence of any retirement and 
employee group health, life, disability, 
vision and dental insurance 
contributions, must be provided. A 
partnership must also include its IRS 
Form 1065 K–1s. 
(ii) If the applicant is self-employed 
and has employees, the applicant’s 2019 
or 2020 (whichever was used to 
calculate loan amount) IRS Form 1040 
Schedule C, Form 941 (or other tax 
forms or equivalent payroll processor 
records containing similar information) 
and state quarterly wage unemployment 
insurance tax reporting forms from each 
quarter in 2019 or 2020 (whichever was 
used to calculate loan amount), as 
applicable, or equivalent payroll 
processor records, along with evidence 
of any retirement and employee group 
health, life, disability, vision and dental 
insurance contributions, if applicable, 
must be provided. A payroll statement 
or similar documentation from the pay 
period that covered February 15, 2020 
must be provided to establish the 
applicant was in operation on February 
15, 2020. 
(iii) If the applicant is self-employed 
and does not have employees, the 
applicant must provide (a) its 2019 or 
2020 (whichever was used to calculate 
loan amount) Form 1040 Schedule C, (b) 
a 2019 or 2020 (whichever was used to 
calculate loan amount) IRS Form 1099– 
MISC detailing nonemployee 
compensation received (box 7), invoice, 
bank statement, or book of record that 
establishes that the applicant is self- 
employed; and (c) a 2020 invoice, bank 
statement, or book of record to establish 
that the applicant was in operation on 
or around February 15, 2020. 
(iv) For loans with a principal amount 
greater than $150,000, documentation 
sufficient to establish that the applicant 
experienced a reduction in revenue, as 
provided in subsection(c)(1)(iv), must be 
VerDate Sep<11>2014 
00:10 Jan 14, 2021
Jkt 253001
PO 00000
Frm 00030
Fmt 4701
Sfmt 4700
E:\FR\FM\14JAR6.SGM
14JAR6
khammond on DSKJM1Z7X2PROD with RULES6

3721 
Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations 
38 A representative of the applicant can certify for 
the business as a whole if the representative is 
legally authorized to do so. 
provided at the time of application, 
which may include relevant tax forms, 
including annual tax forms, or, if 
relevant tax forms are not available, a 
copy of the applicant’s quarterly income 
statements or bank statements. 
(v) For loans with a principal amount 
of $150,000 or less, the applicant must 
submit documentation sufficient to 
establish that the applicant experienced 
a reduction in revenue as provided in 
subsection (c)(1)(i) of this section at the 
time of application, on or before the 
date the borrower submits an 
application for loan forgiveness, or, if 
the borrower does not apply for loan 
forgiveness, at SBA’s request. Such 
documentation may include relevant tax 
forms, including annual tax forms, or, if 
relevant tax forms are not available, a 
copy of the applicant’s quarterly income 
statements or bank statements. 
(3) On the Second Draw PPP Loan 
borrower application, an authorized 
representative of the applicant 38 must 
make the certifications listed in 
subsection (B)(12) of the Consolidated 
First Draw PPP IFR, except: 
(i) Instead of the certification in 
subsection (B)(12)(v) of the 
Consolidated First Draw PPP IFR, the 
applicant must certify that the applicant 
has not and will not receive another 
Second Draw Paycheck Protection 
Program Loan; and 
(ii) an authorized representative of the 
applicant must also certify: 
(A) The Applicant has realized a 
reduction in gross receipts in excess of 
25% relative to the relevant comparison 
time period. For loans greater than 
$150,000, Applicant has provided 
documentation to the lender 
substantiating the decline in gross 
receipts. For loans of $150,000 or less, 
Applicant will provide documentation 
substantiating the decline in gross 
receipts upon or before seeking loan 
forgiveness for the Second Draw 
Paycheck Protection Program Loan or 
upon SBA request. 
(B) The Applicant received a First 
Draw Paycheck Protection Program 
Loan and, before the Second Draw 
Paycheck Protection Program Loan is 
disbursed, will have used the full loan 
amount (including any increase) of the 
First Draw Paycheck Protection Program 
Loan only for eligible expenses. 
(C) The Applicant is not a business 
concern or entity (a) for which an entity 
created in or organized under the laws 
of the People’s Republic of China or the 
Special Administrative Region of Hong 
Kong, or that has significant operations 
in the People’s Republic of China or the 
Special Administrative Region of Hong 
Kong, owns or holds, directly or 
indirectly, not less than 20 percent of 
the economic interest of the business 
concern or entity, including as equity 
shares or a capital or profit interest in 
a limited liability company or 
partnership; or (b) that retains, as a 
member of the board of directors of the 
business concern, a person who is a 
resident of the People’s Republic of 
China. 
(D) The Applicant is not required to 
submit a registration statement under 
section 2 of the Foreign Agents 
Registration Act of 1938 (22 U.S.C. 612). 
(E) The Applicant is not a business 
concern or entity primarily engaged in 
political or lobbying activities, 
including any entity that is organized 
for research or for engaging in advocacy 
in areas such as public policy or 
political strategy or otherwise describes 
itself as a think tank in any public 
documents. 
(4) A lender must submit SBA Form 
2484–SD (Paycheck Protection Program 
Lender’s Application—Second Draw 
Loan Guaranty) electronically in 
accordance with program requirements 
and maintain the forms and supporting 
documentation in its files. 
(h) What do lenders need to know and 
do? 
(1) A lender approved to make First 
Draw PPP Loans may make Second 
Draw PPP Loans under the same terms 
and conditions applicable to First Draw 
PPP Loans, including all requirements 
under sections (C) and (D) of the 
Consolidated First Draw PPP IFR, 
except as otherwise provided in this 
section. 
(2) What do lenders have to do in 
terms of loan underwriting? 
(i) Each lender shall: 
(A) Confirm receipt of borrower 
certifications contained in Paycheck 
Protection Program Second Draw 
Borrower Application Form (SBA Form 
2483–SD) or lender’s equivalent; 
(B) Confirm receipt of information 
demonstrating that a borrower was 
either an eligible self-employed 
individual, independent contractor, or 
sole proprietorship with no employees 
or had employees for whom the 
borrower paid salaries and payroll taxes 
on or around February 15, 2020; 
(C) Confirm the dollar amount of 
average monthly payroll costs for 2019 
or 2020 (whichever was used to 
calculate loan amount) by reviewing the 
payroll documentation submitted with 
the borrower’s application; 
(D) For a Second Draw PPP Loan 
greater than $150,000 or a loan of 
$150,000 or less where the borrower 
provides documentation of revenue 
reduction, confirm the dollar amount 
and percentage of the borrower’s 
revenue reduction by performing a good 
faith review, in a reasonable time, of the 
borrower’s calculations and supporting 
documents concerning the borrower’s 
revenue reduction. For a loan of 
$150,000 or less where the borrower 
does not provide documentation of 
revenue reduction with its application, 
the lender shall perform this review 
when the borrower provides such 
documentation. If the lender identifies 
errors in the borrower’s calculation or 
material lack of substantiation in the 
borrower’s supporting documents, the 
lender should work with the borrower 
to remedy the issue. 
(E) Follow applicable BSA 
requirements (listed in subsection 
(C)(3)(d) of the Consolidated First Draw 
PPP IFR); and 
(ii) Each lender’s underwriting 
obligation under the Second Draw PPP 
is limited to the items above and 
reviewing the ‘‘Paycheck Protection 
Program Second Draw Borrower 
Application Form’’ (SBA Form 2483– 
SD) or lender’s equivalent form. 
(iii) A lender may rely on any 
certification or documentation 
submitted by an applicant for a PPP 
loan or an eligible recipient or eligible 
entity that (A) is submitted pursuant to 
all applicable statutory requirements, 
regulations, and guidance related to a 
PPP loan, including under sections 
7(a)(36) or (37) of the Small Business 
Act (15 U.S.C. 636(a)(36) and (37)); and 
(B) attests that the applicant, eligible 
recipient, or eligible entity, as 
applicable, has accurately provided the 
certification or documentation to the 
lender in accordance with the statutory 
requirements, regulations, and guidance 
related to PPP loans. With respect to a 
lender that relies on such a certification 
or documentation related to a Second 
Draw PPP Loan, an enforcement action 
may not be taken against the lender, and 
the lender shall not be subject to any 
penalties relating to loan origination or 
forgiveness of the Second Draw PPP 
Loan, if—(A) the lender acts in good 
faith relating to loan origination or 
forgiveness of the Second Draw PPP 
Loan based on that reliance; and (B) all 
other relevant Federal, State, local, and 
other statutory and regulatory 
requirements applicable to the lender 
are satisfied with respect to the Second 
Draw PPP Loan. 
(3) SBA will pay lenders fees for 
processing Second Draw PPP Loans in 
the following amounts: 
VerDate Sep<11>2014 
00:10 Jan 14, 2021
Jkt 253001
PO 00000
Frm 00031
Fmt 4701
Sfmt 4700
E:\FR\FM\14JAR6.SGM
14JAR6
khammond on DSKJM1Z7X2PROD with RULES6

3722 
Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations 
(i) for a Second Draw PPP Loan of up 
to (and including) $50,000, in an 
amount equal to the lesser of: 
(A) 50 percent of the balance of the 
financing outstanding at the time of 
disbursement of the loan; or 
(B) $2,500; and 
(ii) for a Second Draw PPP Loan of 
more than $50,000, in an amount that is: 
(A) 5 percent of the balance of the 
financing outstanding at the time of 
disbursement of the loan for a loan up 
to (and including) $350,000; and 
(B) 3 percent of the balance of the 
financing outstanding at the time of 
disbursement of the loan for a loan 
above $350,000. 
(i) Will an applicant’s Second Draw PPP 
Loan application be affected if there are 
unresolved issues regarding the 
applicant’s First Draw PPP Loan? 
(1) If a First Draw PPP Loan is under 
review pursuant to PPP rules and/or 
information in SBA’s possession 
indicates that the borrower may have 
been ineligible for the First Draw PPP 
Loan it received or for the loan amount 
received by the borrower, the lender 
will receive notification from SBA when 
the lender submits an application for 
guaranty of a Second Draw PPP Loan 
(‘‘unresolved borrower’’). 
(2) If the lender receives notification 
that the Applicant for a Second Draw 
PPP Loan is an unresolved borrower, the 
lender will not receive an SBA loan 
number. SBA will resolve the issue 
related to the unresolved borrower 
expeditiously and will notify the lender 
of the process to obtain an SBA loan 
number for the Second Draw PPP Loan, 
if appropriate. 
(j) Are Second Draw PPP Loans eligible 
for loan forgiveness? 
Second Draw PPP Loans are eligible 
for loan forgiveness on the same terms 
and conditions as First Draw PPP Loans, 
except that Second Draw PPP Loan 
borrowers with a principal amount of 
$150,000 or less are required to provide 
documentation of revenue reduction if 
such documentation was not provided 
at the time of the loan application as 
specified in subsections (g)(2)(iv) and 
(v) of this section. 
V. Additional Information 
SBA may provide further guidance, if 
needed, through SBA notices and a 
program guide which will be posted on 
SBA’s website at www.sba.gov. 
Questions on the Paycheck Protection 
Program 7(a) Loans (First Draw PPP 
Loans and Second Draw PPP Loans) 
may be directed to the Lender Relations 
Specialist in the local SBA Field Office. 
The local SBA Field Office may be 
found at https://www.sba.gov/tools/ 
local-assistance/districtoffices. 
Compliance With Executive Orders 
12866, 12988, 13132, 13563, and 13771, 
the Paperwork Reduction Act (44 U.S.C. 
Ch. 35), and the Regulatory Flexibility 
Act (5 U.S.C. 601–612) 
Executive Orders 12866, 13563, and 
13771 
This interim final rule is 
economically significant for the 
purposes of Executive Orders 12866 and 
13563, and the Office of Management 
and Budget’s Office of Information and 
Regulatory Affairs (OIRA) had 
determined that this is a major rule 
under the Congressional Review Act (5 
U.S.C. 804(2)). SBA, however, is 
proceeding under the emergency 
provision at Executive Order 12866 
section 6(a)(3)(D) based on the need to 
move expeditiously to mitigate the 
current economic conditions arising 
from the COVID–19 emergency. This 
rule’s designation under Executive 
Order 13771 will be informed by public 
comment. 
This rule is necessary to implement 
the Economic Aid Act in order to 
provide economic relief to small 
businesses nationwide adversely 
impacted under the COVID–19 
Emergency Declaration. We anticipate 
that this rule will result in substantial 
benefits to small businesses, their 
employees, and the communities they 
serve. However, we lack data to estimate 
the effects of this rule. 
The Administrator of OIRA has 
determined that this is a major rule for 
purposes of the Congressional Review 
Act (5 U.S.C. 801 et seq.) (CRA). Under 
section 801(3) of the CRA, a major rule 
takes effect 60 days after the rule is 
published in the Federal Register. 
Notwithstanding this requirement, 
section 808(2) of the CRA allows 
agencies to dispense with the 
requirements of section 801 when the 
agency for good cause finds that such 
procedure would be impracticable, 
unnecessary, or contrary to the public 
interest and the rule shall take effect at 
such time as the agency promulgating 
the rule determines. Pursuant to section 
808(2) of the CRA, SBA finds, for good 
cause, that a 60-day delay in the 
effective date is unnecessary and 
contrary to the public interest. 
As discussed elsewhere in this 
interim final rule, the last day to apply 
for and receive a PPP loan is March 31, 
2021. Given the short duration of this 
program, and the urgent need to issue 
loans quickly, the Administrator in 
consultation with the Secretary has 
determined that it is impractical and not 
in the public interest to provide a 
delayed effective date. An immediate 
effective date will give small businesses 
the maximum amount of time to apply 
for loans and lenders the maximum 
amount of time to process applications 
before the program ends. 
Executive Order 12988 
SBA has drafted this rule, to the 
extent practicable, in accordance with 
the standards set forth in section 3(a) 
and 3(b)(2) of Executive Order 12988, to 
minimize litigation, eliminate 
ambiguity, and reduce burden. The rule 
has no preemptive or retroactive effect. 
Executive Order 13132 
SBA has determined that this rule 
will not have substantial direct effects 
on the States, on the relationship 
between the National Government and 
the States, or on the distribution of 
power and responsibilities among the 
various layers of government. Therefore, 
SBA has determined that this rule has 
no federalism implications warranting 
preparation of a federalism assessment. 
Paperwork Reduction Act, 44 U.S.C. 
Chapter 35 
SBA has determined that this rule 
will impose new recordkeeping or 
reporting requirements under the 
Paperwork Reduction Act (‘‘PRA’’). This 
information collection (IC) consists of 
SBA Form 2483–SD (Paycheck 
Protection Program Second Draw 
Application Form) and SBA Form 2484– 
SD (Paycheck Protection Program 
Lender’s Application—Second Draw 
Loan Guaranty. SBA has requested 
emergency approval for the IC required 
to implement the Second Draw PPP 
Program described above. 
Regulatory Flexibility Act (RFA) 
The Regulatory Flexibility Act (RFA) 
generally requires that when an agency 
issues a proposed rule, or a final rule 
pursuant to section 553(b) of the APA or 
another law, the agency must prepare a 
regulatory flexibility analysis that meets 
the requirements of the RFA and 
publish such analysis in the Federal 
Register. 5 U.S.C. 603, 604. Specifically, 
the RFA normally requires agencies to 
describe the impact of a rulemaking on 
small entities by providing a regulatory 
impact analysis. Such analysis must 
address the consideration of regulatory 
options that would lessen the economic 
effect of the rule on small entities. The 
RFA defines a ‘‘small entity’’ as (1) a 
proprietary firm meeting the size 
standards of the Small Business 
Administration (SBA); (2) a nonprofit 
organization that is not dominant in its 
field; or (3) a small government 
VerDate Sep<11>2014 
00:10 Jan 14, 2021
Jkt 253001
PO 00000
Frm 00032
Fmt 4701
Sfmt 4700
E:\FR\FM\14JAR6.SGM
14JAR6
khammond on DSKJM1Z7X2PROD with RULES6

3723 
Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations 
jurisdiction with a population of less 
than 50,000. 5 U.S.C. 601(3)–(6). Except 
for small government jurisdictions with 
a population of less than 50,000, neither 
State nor local governments are ‘‘small 
entities.’’ 
The requirement to conduct a 
regulatory impact analysis does not 
apply if the head of the agency ‘‘certifies 
that the rule will not, if promulgated, 
have a significant economic impact on 
a substantial number of small entities.’’ 
5 U.S.C. 605(b). The agency must, 
however, publish the certification in the 
Federal Register at the time of 
publication of the rule, ‘‘along with a 
statement providing the factual basis for 
such certification.’’ If the agency head 
has not waived the requirements for a 
regulatory flexibility analysis in 
accordance with the RFA’s waiver 
provision, and no other RFA exception 
applies, the agency must prepare the 
regulatory flexibility analysis and 
publish it in the Federal Register at the 
time of promulgation or, if the rule is 
promulgated in response to an 
emergency that makes timely 
compliance impracticable, within 180 
days of publication of the final rule. 5 
U.S.C. 604(a), 608(b). 
Rules that are exempt from notice and 
comment are also exempt from the RFA 
requirements, including conducting a 
regulatory flexibility analysis, when 
among other things the agency for good 
cause finds that notice and public 
procedure are impracticable, 
unnecessary, or contrary to the public 
interest. Small Business 
Administration’s Office of Advocacy 
guide: How to Comply with the 
Regulatory Flexibility Ac. Ch.1. p.9. 
Since this rule is exempt from notice 
and comment, SBA is not required to 
conduct a regulatory flexibility analysis. 
Authority: 15 U.S.C. 636(a)(36); 
Coronavirus Aid, Relief, and Economic 
Security Act, Pub. L. 116–136, section 1114; 
and Economic Aid to Hard-Hit Small 
Businesses, Nonprofits, and Venues Act, Pub. 
L. 116–260, section 303. 
Jovita Carranza, 
Administrator. 
[FR Doc. 2021–00452 Filed 1–12–21; 4:15 pm] 
BILLING CODE 8026–03–P 
VerDate Sep<11>2014 
00:10 Jan 14, 2021
Jkt 253001
PO 00000
Frm 00033
Fmt 4701
Sfmt 9990
E:\FR\FM\14JAR6.SGM
14JAR6
khammond on DSKJM1Z7X2PROD with RULES6

File and source

File

2021-01-14_2021-00452.pdf

Size

239,824 bytes

SHA-256

496d0c65ea9ab816c26540cd73af5cdc1be73b4b38778e81d1647af6dd1174c7

Our copy

2021-01-14_2021-00452.pdf

Original

www.federalregister.gov