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Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations 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 SBAs and the Department of the Treasurys Treasurys 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.

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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 Americas 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 30day 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.
8082. Although this IFR is effective immediately, comments are solicited from interested members of the public on all aspects of the interim final rule.
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.

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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 borrowers 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 SBAs Consolidated First Draw PPP
IFR, Frequently Asked Questions FAQs, and other guidance about PPP
loans under section 7a36 of the Small Business Act 15 U.S.C. 636a36
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 borrowers 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 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.

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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 c1i through c1iv of this IFR
implement these criteria. Subsection c1ii of the IFR clarifies that the full amount of the borrowers 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 c1ii 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 borrowers quarterly gross receipts for one quarter in 2020 with the borrowers 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 c1ivA
of the IFR reflects this methodology.
Subsection c1ivB 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 4 See paragraph 7a37Aiv of the Small Business Act.
5 See paragraph 7a37O of the Small Business Act.
6 Subsection B11 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 7a37Aiv of the Small Business Act.

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