3692 Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations 

SMALL BUSINESS ADMINISTRATION 

13 CFR Parts 113, 120, and 121 

[Docket No. SBA–2021–0001] 

RIN 3245–AH62 

DEPARTMENT OF THE TREASURY 

RIN 1505–AC74 

Business Loan Program Temporary 

Changes; Paycheck Protection 

Program as Amended by Economic 

Aid Act 

AGENCY: U.S. Small Business 

Administration; Department of the 

Treasury. 

ACTION: Interim final rule. 

SUMMARY: On April 2, 2020, the U.S. 

Small Business Administration (SBA) 

posted an interim final rule announcing 

the implementation of sections 1102 

and 1106 of the Coronavirus Aid, Relief, 

and Economic Security Act (CARES 

Act). Section 1102 of the CARES Act 

temporarily adds a new program, titled 

the ‘‘Paycheck Protection Program,’’ to 

the SBA’s 7(a) Loan Program. Section 

1106 of the CARES Act provides for 

forgiveness of up to the full principal 

amount of qualifying loans guaranteed 

under the Paycheck Protection Program 

(PPP). The PPP is intended to provide 

economic relief to small businesses 

nationwide adversely impacted by the 

Coronavirus Disease 2019 (COVID–19). 

Subsequently, SBA published twentythree interim final rules providing 

additional guidance on the PPP (some of 

which were jointly issued with the 

Department of the Treasury) and 

Treasury published one interim final 

rule. On December 27, 2020, the 

Economic Aid to Hard-Hit Small 

Businesses, Nonprofits, and Venues Act 

(Economic Aid Act) became law. The 

Economic Aid Act extends the authority 

to make PPP loans through March 31, 

2021 and revises certain PPP 

requirements. This interim final rule 

incorporates the Economic Aid Act 

amendments required to be 

implemented by regulation within 10 

days of enactment. For ease of borrower 

and lender reference, this interim final 

rule also consolidates the interim final 

rules (and important guidance) issued to 

date governing borrower eligibility, 

lender eligibility, and PPP application 

and origination requirements for new 

PPP loans, as well as provides general 

rules relating to loan increases and loan 

forgiveness. This rule is not intended to 

substantively alter or affect PPP rules 

that were not amended by the Economic 

Aid Act. Additional rules related to 

second draw PPP loans will be 

published separately, and SBA intends 

to issue a consolidated rule governing 

all aspects of loan forgiveness and the 

loan review process as well. This 

interim final rule is intended to govern 

new PPP loans made under the 

Economic Aid Act, as well as 

applications for loan forgiveness on 

existing PPP loans where the loan 

forgiveness payment has not been 

remitted, and should not be construed 

to alter or affect the requirements 

applicable to PPP loans closed prior to 

its enactment, unless the provisions 

apply retroactively consistent with 

specific applicability provisions of the 

Economic Aid Act as identified in this 

rule. In addition, in this interim final 

rule, Treasury exercises its authority 

under section 1109 of the CARES Act to 

allow borrowers of first draw PPP loans 

to use 2019 or 2020 to calculate their 

maximum loan amount. 

DATES:

Effective date: Unless otherwise 

specified in this interim final rule, the 

provisions of this interim final rule are 

effective January 12, 2021. 

Applicability date: This interim final 

rule applies to loan applications, 

including requests for increases, and 

applications for loan forgiveness 

submitted under the Paycheck 

Protection Program following enactment 

of the Economic Aid Act. This interim 

final rule also applies to loan 

forgiveness applications submitted 

under the Paycheck Protection Program 

before enactment of the Economic Aid 

Act where SBA has not remitted the 

forgiveness payment. 

Comment date: Comments must be 

received on or before February 16, 2021. 

ADDRESSES: You may submit comments, 

identified by number SBA–2021–0001 

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 March 13, 2020, President Trump 

declared the ongoing Coronavirus 

Disease 2019 (COVID–19) pandemic of 

sufficient severity and magnitude to 

warrant an emergency declaration for all 

states, territories, and the District of 

Columbia. With the COVID–19 

emergency, many small businesses 

nationwide continue to experience 

economic hardship as a direct result of 

the Federal, State, and local public 

health measures that continue to be 

taken to minimize the public’s exposure 

to the virus. In addition, based on the 

advice of public health officials, other 

voluntary measures continue to be 

observed, resulting in a decrease in 

economic activity as the public avoids 

malls, retail stores, and other 

businesses. 

On March 27, 2020, the President 

signed the Coronavirus Aid, Relief, and 

Economic Security Act (the CARES Act 

or the Act) (Pub. L. 116–136) to provide 

emergency assistance and health care 

response for individuals, families, and 

businesses affected by the coronavirus 

pandemic. The Small Business 

Administration (SBA) received funding 

and authority through the Act to modify 

existing loan programs and establish a 

new loan program to assist small 

businesses nationwide adversely 

impacted by the COVID–19 emergency. 

Section 1102 of the CARES Act 

temporarily permitted SBA to guarantee 

100 percent of 7(a) loans under a new 

program titled the ‘‘Paycheck Protection 

Program,’’ pursuant to section 7(a)(36) 

of the Small Business Act (15 U.S.C. 

636(a)(36)). Section 1106 of the CARES 

Act provided for forgiveness of up to the 

full principal amount of qualifying 

loans guaranteed under the Paycheck 

Protection Program. A more detailed 

discussion of sections 1102 and 1106 of 

the Act is found in section III. 

On April 24, 2020, the President 

signed the Paycheck Protection Program 

and Health Care Enhancement Act (Pub. 

L. 116–139), which provided additional 

funding and authority for the PPP. On 

June 5, 2020, the President signed the 

Paycheck Protection Program Flexibility 

Act of 2020 (Flexibility Act) (Pub. L. 

116–142), which changed key 

provisions of the Paycheck Protection 

Program, including provisions relating 

to the maturity of PPP loans, the deferral 

of PPP loan payments, and the 

forgiveness of PPP loans. Section 3(d) of 

the Flexibility Act provided that the 

amendments relating to PPP loan 


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Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations 3693 

1Because section 1106 of the CARES Act is now 

codified as section 7A of the Small Business Act, 

any reference to section 1106 of the CARES Act in 

the rules that are being restated herein will refer to 

section 7A. 

forgiveness and extension of the deferral 

period for PPP loans were effective as if 

included in the CARES Act, which 

meant that they were retroactive to 

March 27, 2020. Section 2 of the 

Flexibility Act provided that the 

amendment relating to the extension of 

the maturity date for PPP loans became 

effective on the date of enactment (June 

5, 2020). Under the Flexibility Act, the 

extension of the maturity date for PPP 

loans was applicable to PPP loans made 

on or after that date, and lenders and 

borrowers were able to mutually agree 

to modify PPP loans made before such 

date to reflect the longer maturity. On 

July 4, 2020, Public Law 116–147 

extended the authority for SBA to 

guarantee PPP loans to August 8, 2020. 

On December 27, 2020, the Economic 

Aid to Hard-Hit Small Businesses, 

Nonprofits, and Venues Act (Economic 

Aid Act) (Pub. L. 116–260) was enacted, 

which reauthorizes lending under the 

PPP through March 31, 2021, and 

among other things, modifies provisions 

related to making PPP loans and 

forgiveness of PPP loans, and authorizes 

second draw PPP loans under new 

section 7(a)(37) of the Small Business 

Act for PPP borrowers that previously 

received a PPP loan (rules for second 

draw loans will be published 

separately). The Economic Aid Act also 

redesignates section 1106 of the CARES 

Act as section 7A and transfers that 

section to the Small Business Act, to 

appear after section 7 of the Small 

Business Act.1

In addition to incorporating the 

changes to PPP requirements made by 

the Economic Aid Act, this interim final 

rule consolidates and restates the 

following interim final rules: 85 FR 

20811 (posted on April 2, 2020 and 

published in the Federal Register on 

April 15, 2020); 85 FR 20817 (posted on 

April 3, 2020 and published on April 

15, 2020); 85 FR 21747 (posted on April 

14, 2020 and published on April 20, 

2020); 85 FR 23450 (posted on April 24, 

2020 and published on April 28, 2020); 

85 FR 23917 (posted on April 27, 2020 

and published on April 30, 2020); 85 FR 

26321 (posted on April 28, 2020 and 

published on May 4, 2020); 85 FR 26324 

(posted on April 30, 2020 and published 

on May 4, 2020); 85 FR 27827 (posted 

on May 5, 2020 and published on May 

8, 2020); 85 FR 29845 (posted on May 

8, 2020 and published on May 19, 

2020); 85 FR 29842 (posted on May 13, 

2020 and published on May 19, 2020); 

85 FR 29847 (posted on May 14, 2020 

and published on May 19, 2020); 85 FR 

30835 (posted on May 18, 2020 and 

published on May 21, 2020); 85 FR 

31357 (posted on May 20, 2020 and 

published on May 26, 2020); 85 FR 

35550 (posted on June 5, 2020 and 

published on June 11, 2020); 85 FR 

36308 (posted on June 11, 2020 and 

published on June 16, 2020); 85 FR 

36717 (posted on June 12, 2020 and 

published on June 18, 2020); 85 FR 

36997 (posted on June 17, 2020 and 

published on June 19, 2020); 85 FR 

38301 (posted on June 24, 2020 and 

published on June 26, 2020); and 85 FR 

39066 (posted on June 25, 2020 and 

published on June 30, 2020). This rule 

should be interpreted consistently with 

the sets of Frequently Asked Questions 

(FAQs) regarding the PPP that are 

posted on SBA’s and Treasury’s 

websites and the interim final rules 

posted separately providing guidance on 

second draw PPP loans and the 

consolidated guidance on loan 

forgiveness and the loan review process; 

however, the Economic Aid Act 

overrides any conflicting guidance in 

the FAQs, and SBA will be revising the 

FAQs to fully conform to the Economic 

Aid Act as quickly as feasible. 

Most of this document 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, as well as general rules on 

increases and loan forgiveness for PPP 

loans. To enhance the readability of this 

document, SBA has not reproduced the 

policy and legal justifications for 

existing regulatory provisions restated 

here, except to the extent that those 

justifications may be helpful to the 

borrower or lender. However, those 

justifications from the original interim 

final rules are incorporated by reference 

here. 

In addition, section 1109(b) of the 

CARES Act authorizes Treasury to 

establish criteria for certain other 

lenders to participate in the PPP. The 

SBA is required to administer the 

program that Treasury establishes under 

section 1109 of the Act, with guidance 

from Treasury. The CARES Act 

authorizes Treasury to issue regulations 

and guidance to implement section 

1109, including regulations that 

establish ‘‘terms and conditions’’ for 

PPP loans. See section 1109(d)(2). The 

terms and conditions established by 

Treasury under section 1109 are not 

required to be identical to those 

provided elsewhere. Rather, the CARES 

Act allows Treasury to set terms and 

conditions pertaining to certain 

criteria—the maximum interest rate, 

maximum loan amount, and other 

specified terms—that are ‘‘consistent,’’ 

to ‘‘the maximum extent practicable,’’ 

with comparable terms in paragraph 36 

of section 7(a) of the Small Business Act 

(15 U.S.C. 636(a)). See section 

1109(d)(2). 

In this rulemaking, Treasury is 

addressing the needs of new PPP 

borrowers by allowing all new 

borrowers to use 2019 or 2020 for 

purposes of calculating their maximum 

loan amount. Section 1102 of the 

CARES Act states that borrowers are to 

calculate their maximum loan amount 

by using ‘‘payroll costs incurred during 

the 1-year period before the date on 

which the loan is made . . . .’’ For PPP 

loans made in 2020, most borrowers 

used 2019. The Economic Aid Act did 

not change this language for borrowers 

that are not farmers and ranchers and 

would require most new PPP borrowers 

who obtain a loan in 2021 to use 2020 

as their base period. Using authority 

granted by section 1109 of the CARES 

Act, this rulemaking allows new 

borrowers to choose 2019 or 2020 as the 

base period, thereby ensuring that they 

are able to obtain funding on terms 

commensurate with existing PPP 

borrowers. Separately, section 313 of the 

Economic Aid Act states that farmers 

and ranchers are to calculate their 

maximum loan amount using 2019 as 

their base period. This rulemaking 

allows farmers and ranchers to elect 

either 2019 or 2020 as their base period, 

in order to ensure that they can obtain 

funding on terms commensurate with 

those available to other new PPP 

borrowers. 

As required by section 1109(d)(2)(B) 

of the CARES Act, Treasury has 

determined that providing new PPP 

borrowers with flexibility in choosing a 

base period is consistent, to the 

‘‘maximum extent practicable,’’ with the 

terms applicable to existing PPP 

borrowers. This enhanced flexibility 

will help ensure that new PPP 

borrowers are treated even-handedly 

and do not see their permissible loan 

amounts reduced due to financial 

distress experienced in 2020. Other than 

these adjustments, the terms and 

requirements applicable to PPP loans 

under this rule are identical to the terms 

and requirements applicable to all other 

PPP loans. As a result, a PPP borrower 

that elects to use the flexibility in 

selecting a base period under this 

interim final rule may follow the same 

processes and procedures applicable to 

other PPP loans. 


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3694 Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations 

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 both the CARES 

Act and the Economic Aid Act is that 

SBA provides relief to America’s small 

businesses expeditiously. Congress 

reauthorized PPP because of the current 

economic conditions affecting small 

businesses and intended for the loans to 

be made quickly. 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 interim final rule 

is effective immediately, comments are 

solicited from interested members of the 

public on all aspects of the interim final 

rule, including section III. These 

comments must be submitted on or 

before February 16, 2021. The SBA will 

consider these comments and the need 

for making any revisions as a result of 

these comments. 

III. Paycheck Protection Program as 

Amended by Economic Aid Act 

Overview 

The CARES Act was enacted to 

provide immediate assistance to 

individuals, families, and businesses 

affected by the COVID–19 emergency. 

Among the provisions contained in the 

CARES Act are provisions authorizing 

SBA to temporarily guarantee loans 

under a new 7(a) loan program titled the 

‘‘Paycheck Protection Program.’’ Loans 

guaranteed under the Paycheck 

Protection Program (PPP) will be 100 

percent guaranteed by SBA, and the full 

principal amount of the loans may 

qualify for loan forgiveness. The 

Economic Aid Act reauthorizes lending 

under the PPP through March 31, 2021, 

and revises certain PPP requirements. 

The following outlines the key 

provisions of the PPP related to 

eligibility of applicants for PPP loans, 

which lenders are authorized to make 

PPP loans, the process for making PPP 

loans, loan increases, and loan 

forgiveness, as revised by the Economic 

Aid Act. Additional rules related to 

second draw PPP loans will be 

published separately. While this interim 

final rule fully implements the 

Economic Aid Act’s changes to loan 

forgiveness, SBA also intends to issue a 

consolidated rule governing all aspects 

of loan forgiveness and loan review as 

well to provide a single reference point 

for lenders and borrowers. 

Table of Contents 

A. General 

B. What do borrowers need to know and do? 

1. What businesses, organizations, and 

individuals are eligible? 

2. What businesses, organizations, and 

individuals are ineligible? 

3. Affiliation Rules Generally 

4. I Have Determined That I Am Eligible. 

How much can I borrow? 

5. What is the interest rate on a PPP loan? 

6. What will be the maturity date on a PPP 

loan? 

7. Can I apply for more than one First Draw 

PPP Loan? 

8. Can I use e-signatures or e-consents if a 

borrower has multiple owners? 

9. When will I have to begin paying 

principal and interest on my PPP loan? 

10. What forms do I need and how do I 

submit an application for a PPP loan? 

11. How can PPP loans be used? 

12. What certifications need to be made? 

13. Limited Safe Harbor With Respect to 

Certification Concerning Need for PPP 

Loan Request 

14. Can my PPP loan be forgiven in whole 

or in part? 

15. Do independent contractors count as 

employees for purposes of PPP loan 

forgiveness? 

16. For loans made prior to December 27, 

2020, what additional documentation 

must a borrower submit when the 

President of the United States, Vice 

President of the United States, the head 

of an Executive department, or a Member 

of Congress, or the spouse of any of the 

preceding, directly or indirectly holds a 

controlling interest in the borrower? 

C. What do lenders need to know and do? 

1. Who is eligible to make PPP loans? 

2. Do lenders have to register in SAM.gov 

to make PPP loans? 

3. What do lenders have to do in terms of 

loan underwriting? 

4. Can lenders rely on borrower 

documentation for loan forgiveness? 

5. What fees will lenders be paid? 

6. Can PPP loans be sold into the 

secondary market? 

7. Do the requirements for loan pledges 

under 13 CFR 120.434 apply to PPP 

loans pledged for borrowings from a 

Federal Reserve Bank (FRB) or advances 

by a Federal Home Loan Bank (FHLB)? 

8. Are lenders required to use a promissory 

note provided by SBA or may they use 

their own? 

9. Are lenders required to use a separate 

SBA Authorization document to issue 

PPP loans? 

10. By when must a lender electronically 

submit an SBA Form 1502 indicating 

that PPP loan funds have been 

disbursed? 

11. How do lenders report disbursements 

on PPP loans that are approved for loan 

increases due to the Economic Aid Act? 

D. What do both borrowers and lenders need 

to know and do? 

1. What are the loan terms and conditions? 

2. Do lenders have to apply the ‘‘credit 

elsewhere test’’? 

3. Are there any fee waivers? 

4. Who pays the fee to an agent who 

provides assistance in connection with a 

PPP loan? 

5. Can a borrower take multiple draws from 

a PPP loan and thereby delay the start of 

the covered period? 

6. If a partnership received a PPP loan that 

did not include any compensation for its 

partners, can the loan amount be 

increased to include partner 

compensation? 

7. If a seasonal employer received a PPP 

loan before December 27, 2020, can the 

loan amount be increased based on a 

revised calculation of the maximum loan 

amount? 

8. Which other PPP borrowers can reapply 

or request an increase in their PPP loan 

amount? 

9. If a borrower’s PPP loan has already 

been fully disbursed, can the lender 

make an additional disbursement for the 

increased loan proceeds? 

10. Are recipients of PPP loans entitled to 

exemptions on the grounds provided in 

Federal nondiscrimination laws for sexspecific admissions practices, sexspecific domestic violence shelters, 

coreligionist housing, or Indian tribal 

preferences in connection with adoption 

or foster care practices? 

A. General 

SBA is authorized to guarantee loans 

under the PPP through March 31, 2021. 

Congress has authorized a total program 

level of $806,450,000,000 to provide 

guaranteed loans under this temporary 

7(a) program under sections 7(a)(36) 

(PPP loans or First Draw PPP Loans) and 

7(a)(37) (Second Draw PPP Loans) of the 

Small Business Act, a portion of which 

is available for new First Draw and 

Second Draw PPP Loans. Lenders have 

delegated authority to make PPP loans. 

SBA will allow lenders to rely on 

certifications of the borrower in order to 

determine eligibility of the borrower 

and use of loan proceeds and to rely on 

specified documents provided by the 

borrower to determine qualifying loan 

amount and eligibility for loan 

forgiveness. Lenders must comply with 

the applicable lender obligations set 

forth in this interim final rule, but will 


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Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations 3695 

2See interim final rule on Second Draw PPP 

Loans for eligibility criteria for Second Draw PPP 

Loans, which is being published separately. 

3This subsection was originally published at 85 

FR 20811, subsection III.2.a. (April 15, 2020), as 

amended by 85 FR 36308 (June 16, 2020), 85 FR 

36717 (June 18, 2020), and 85 FR 38301 (June 26, 

2020), and has been modified to reflect subsequent 

rules or guidance and the Economic Aid Act. 

4See section 3 regarding the applicability of 

affiliation rules at 13 CFR 121.103 and 121.301 to 

PPP loans. 

5Under SBA’s alternative size standard, a 

business concern may qualify as a small business 

concern if it, together with any affiliates: (1) Has a 

maximum tangible net worth of not more than $15 

million; and (2) the average net income after 

Federal income taxes (excluding any carry-over 

losses) for the two full fiscal years before the date 

of application is not more than $5 million. 

6See subsections 1.j., 1.k., and 1.m. for additional 

information on the eligibility of housing 

cooperatives, section 501(c)(6) organizations, and 

destination marketing organizations. The applicable 

size standard for these entities is not more than 300 

employees. 

7This subsection was originally published at 85 

FR 30835, section III.1. (May 21, 2020) and has been 

modified for readability. Housing cooperatives, 

section 501(c)(6) organizations, and destination 

marketing organizations, added by the Economic 

Aid Act, must have no more than 300 employees 

to be eligible for PPP loans. 

8Paragraph 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, 

waives SBA’s affiliation rules 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 North American Industry Classification 

System code beginning with 72; (2) any business 

concern operating as a franchise that is assigned a 

franchise identifier code by the Administration; (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 section 121.105 of title 13, Code of Federal 

Regulations, or any successor thereto) that employs 

not more than 500 employees, or the size standard 

established by the Administrator for the North 

American Industry Classification System 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 North American Industry Classification 

System code beginning with 511110 or 5151; or (b) 

any nonprofit organization that is assigned a North 

American Industry Classification System code 

beginning with 5151. SBA also applies affiliation 

exceptions to certain categories of entities. 13 CFR 

121.103(b). 

9For housing cooperatives, section 501(c)(6) 

organizations, and destination marketing 

organizations, the applicable size standard is not 

more than 300 employees. See subsections 1.j. and 

1.m. For the applicable size standard for entities 

eligible to apply for Second Draw PPP Loans, see 

the interim final rule on Second Draw PPP Loans 

that is being published separately. 

10This subsection was originally published at 85 

FR 21747, subsection III.1.a. (April 20, 2020) and 

has been modified to reflect subsequent interim 

final rules or guidance and the Economic Aid Act. 

be held harmless for borrowers’ failure 

to comply with program criteria and 

will not be subject to any enforcement 

action or penalty relating to loan 

origination or forgiveness of the PPP 

loan if the lender acts in good faith 

relating to the origination or forgiveness 

of the PPP loan and satisfies all other 

applicable Federal, State, local, and 

other statutory or regulatory 

requirements (as provided in section 

7A(h) of the Small Business Act, as 

amended). Remedies for violations of 

PPP requirements or fraud are 

separately addressed in this interim 

final rule. The program requirements of 

the PPP identified in this rule 

temporarily supersede any conflicting 

Loan Program Requirement (as defined 

in 13 CFR 120.10). 

B. What do borrowers need to know 

and do? 

1. What businesses, organizations, and 

individuals are eligible? 

a. Am I eligible? 2 3

You are eligible for a PPP loan if: 

i. You, together with any affiliates (if 

applicable),4 are: 

• A small business concern under the 

applicable revenue-based size standard 

established by SBA in 13 CFR 121.201 

for your industry or under the SBA 

alternative size standard; 5

• an independent contractor, eligible 

self-employed individual, or sole 

proprietor; 

• a business concern, a tax-exempt 

nonprofit organization described in 

section 501(c)(3) of the Internal Revenue 

Code (IRC), a tax-exempt veterans 

organization described in section 

501(c)(19) of the IRC, a Tribal business 

concern described in section 31(b)(2)(C) 

of the Small Business Act, and you 

employ no more than the greater of 500 

employees or, if applicable, the size 

standard in number of employees 

established by SBA in 13 CFR 121.201; 

• a housing cooperative, an eligible 

section 501(c)(6) organization, or an 

eligible destination marketing 

organization,6 that employs no more 

than 300 employees; 

• a news organization that is majority 

owned or controlled by a NAICS code 

511110 or 5151 business or a nonprofit 

public broadcasting entity with a trade 

or business under NAICS 511110 or 

5151, that employs no more than 500 

employees (or, if applicable, the size 

standard in number of employees 

established by SBA in 13 CFR 121.201 

for your industry) per location; or 

• another type of entity specifically 

provided for by PPP rules (as described 

below); and 

ii. you were in operation on February 

15, 2020, and either had employees for 

whom you paid salaries and payroll 

taxes or paid independent contractors, 

as reported on a Form 1099–MISC or 

you were an eligible self-employed 

individual, independent contractor, or 

sole proprietorship with no employees. 

You must submit documentation 

sufficient to establish eligibility and to 

demonstrate the qualifying payroll 

amount, which may include, as 

applicable, payroll records, payroll tax 

filings, Form 1099–MISC, Schedule C or 

F, income and expenses from a sole 

proprietorship, or bank records. 

b. Are employees of foreign affiliates 

included for purposes of determining 

whether a PPP borrower has more than 

500 employees (or 300 employees, if 

applicable)? 7

Yes. SBA’s affiliation regulations 

provide that to determine a concern’s 

size, employees of the concern ‘‘and all 

of its domestic and foreign affiliates’’ are 

included. 13 CFR 121.301(f). Therefore, 

to calculate the number of employees of 

an entity for purposes of determining 

eligibility for the PPP, an entity must 

include all employees of its domestic 

and foreign affiliates, except in those 

limited circumstances where the 

affiliation rules expressly do not apply 

to the entity.8 Any entity that, together 

with its domestic and foreign affiliates, 

does not meet the 500-employee, 300- 

employee,9 or other applicable PPP size 

standard is therefore ineligible for a PPP 

loan. Under no circumstances may PPP 

funds be used to support non-U.S. 

workers or operations. 

c. I have income from selfemployment and file a Form 1040, 

Schedule C. Am I eligible for a PPP 

Loan? 10

You are eligible for a PPP loan if: (i) 

You were in operation on February 15, 

2020; (ii) you are an individual with 

self-employment income (such as an 

independent contractor or a sole 

proprietor); (iii) your principal place of 

residence is in the United States; and 

(iv) you filed or will file a Form 1040 

Schedule C for 2019 or meet the 

requirements below. However, if you are 

a partner in a partnership, you may not 

submit a separate PPP loan application 

for yourself as a self-employed 

individual. Instead, the selfemployment income of general active 

partners may be reported as a payroll 

cost, up to $100,000 on an annualized 

basis, as prorated for the period during 

which the payments are made or the 

obligation to make the payments is 

incurred on a PPP loan application filed 

by or on behalf of the partnership. 

Partnerships are eligible for PPP loans 

under the CARES Act, as amended by 

the Economic Aid Act, and the 

Administrator has determined, in 

consultation with the Secretary of the 


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3696 Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations 

11https://www.sba.gov/sites/default/files/2020- 

12/How-to-Calculate-Loan-Amounts-508_6-26- 

20.pdf (April 20, 2020). 12This subsection was originally published at 85 

FR 21747, subsection III.2.a. (April 20, 2020) and 

has been modified for readability. 

13This subsection was originally published at 85 

FR 23917, subsection III.4. (April 30, 2020) and has 

been modified to reflect the Economic Aid Act. 

14This subsection has been added to conform to 

section 317 of the Economic Aid Act. 

15This subsection was originally published at 85 

FR 23450, subsection III.2.c. (April 28, 2020) and 

has been modified for readability. 

16This subsection was originally published at 85 

FR 23450, subsection III.2.d. (April 28, 2020) and 

has been modified for readability. 

17This subsection was originally published at 85 

FR 29847, subsection III.1. (May 19, 2020) and has 

been modified for readability. 

Treasury (Secretary), that limiting a 

partnership and its partners (and an LLC 

filing taxes as a partnership) to one PPP 

loan is necessary to help ensure that as 

many eligible borrowers as possible 

obtain PPP loans before the statutory 

deadline of March 31, 2021. This 

limitation will allow lenders to more 

quickly process applications and lower 

the burdens of applying for 

partnerships/partners. The 

Administrator has further determined 

that permitting partners to apply as selfemployed individuals would create 

unnecessary confusion regarding which 

entity, the partner or the partnership, 

applies for partner and LLC member 

income, and would generate loan 

proceeds use coordination and 

allocation issues. Rent, mortgage 

interest, utilities, other debt service, 

operations expenditures, property 

damage costs, supplier costs, and 

worker protection expenditures are 

generally incurred at the partnership 

level, not partner level, so it is most 

natural to provide the funds for these 

expenses to the partnership, not 

individual partners. In addition, you 

should be aware that participation in 

the PPP may affect your eligibility for 

state-administered unemployment 

compensation or unemployment 

assistance programs, including the 

programs authorized by Title II, Subtitle 

A of the CARES Act, or CARES Act 

Employee Retention Credits. On June 

26, 2020, SBA issued additional 

guidance for those individuals with selfemployment income who: (i) Were not 

in operation in 2019 but who were in 

operation on February 15, 2020, and (ii) 

filed a Form 1040 Schedule C for 2020. 

See ‘‘How To Calculate Maximum Loan 

Amounts—By Business Type,’’ Question 

10 posted on SBA’s website.11

d. Are eligible businesses owned by 

directors or shareholders of a PPP 

lender permitted to apply for a PPP loan 

through the lender with which they are 

associated? 12

SBA regulations (including 13 CFR 

120.110 and 120.140) shall not apply to 

prohibit an otherwise eligible business 

owned (in whole or part) by an outside 

director or holder of a less than 30 

percent equity interest in a PPP lender 

from obtaining a PPP loan from the PPP 

lender on whose board the director 

serves or in which the equity owner 

holds an interest, provided that the 

eligible business owned by the director 

or equity holder follows the same 

process as any similarly situated 

customer or account holder of the 

lender. Favoritism by the lender in 

processing time or prioritization of the 

director’s or equity holder’s PPP 

application is prohibited. Lenders 

should comply with all other applicable 

state and federal regulations concerning 

loans to associates of the lender. 

Lenders should also consult their own 

internal policies concerning lending to 

individuals or entities associated with 

the lender. 

The foregoing paragraph does not 

apply to a director or owner who is also 

an officer or key employee of the PPP 

Lender. Officers and key employees of 

a PPP Lender may obtain a PPP Loan 

from a different lender, but not from the 

PPP Lender with which they are 

associated. SBA also reminds Lenders 

that the ‘‘Authorized Lender Official’’ 

for each PPP Loan is subject to the 

limitations described in the PPP Lender 

Application Form (SBA Form 2484), 

which states in relevant part: ‘‘Neither 

the undersigned Authorized Lender 

Official, nor such individual’s spouse or 

children, has a financial interest in the 

Applicant [Borrower].’’ 

e. If a seasonal business was dormant 

or not fully operating as of February 15, 

2020, is it still eligible? 13

Yes, in evaluating eligibility, a 

seasonal business will be considered to 

have been in operation as of February 

15, 2020, if the business was in 

operation for any 12-week period 

between February 15, 2019 and 

February 15, 2020. This approach aligns 

the eligibility criteria for seasonal 

businesses being in operation with the 

time period for calculation of a seasonal 

employer’s maximum loan amount from 

section 336 of the Economic Aid Act 

and makes PPP loans available to 

seasonal businesses that operate outside 

of the original, more limited time frame. 

f. How does the 500 employee limit 

apply to news organizations with more 

than one physical location? 14

A 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.), with more than one 

physical location 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, is eligible for a PPP 

loan if it: (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. See section 3 

for the applicability of SBA’s affiliation 

rules to news organizations. 

g. Industry-Specific Eligibility Issues 

i. Is a hospital owned by 

governmental entities eligible for a PPP 

loan? 15

Notwithstanding 13 CFR 120.110(j), a 

hospital that is otherwise eligible to 

receive a PPP loan as a business concern 

or nonprofit organization (described in 

section 501(c)(3) of the Internal Revenue 

Code of 1986 and exempt from taxation 

under section 501(a) of such Code) shall 

not be rendered ineligible for a PPP loan 

due to ownership by a state or local 

government if the hospital receives less 

than 50% of its funding from state or 

local government sources, exclusive of 

Medicaid. 

ii. Are businesses that receive revenue 

from legal gaming eligible for a PPP 

Loan? 16

A business that is otherwise eligible 

for a PPP Loan is not rendered ineligible 

due to its receipt of legal gaming 

revenues, and 13 CFR 120.110(g) is 

inapplicable to PPP loans. Businesses 

that received illegal gaming revenue 

remain categorically ineligible. 

iii. Are electric cooperatives that are 

exempt from Federal income taxation 

under section 501(c)(12) of the Internal 

Revenue Code eligible for a PPP loan? 17

Yes. An electric cooperative that is 

exempt from Federal income taxation 

under section 501(c)(12) of the Internal 

Revenue Code will be considered to be 

‘‘a business entity organized for profit’’ 

for purposes of 13 CFR 121.105(a)(1). As 

a result, such entities are eligible PPP 

borrowers, as long as other eligibility 

requirements are met. To be eligible, an 

electric cooperative must satisfy the 

employee-based size standard 

established in the CARES Act, SBA’s 

employee-based size standard 


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Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations 3697 

18Under the alternative size standard, a business 

concern, including an electric cooperative, can 

qualify for the PPP as a small business concern if, 

as of March 27, 2020: (1) The maximum tangible net 

worth of the business was not more than $15 

million; and (2) the average net income after 

Federal income taxes (excluding any carry-over 

losses) of the business for the two full fiscal years 

before the date of the application is not more than 

$5 million. For an electric cooperative that does not 

have net income, the cooperative’s savings 

distributed to its owner-members will be 

considered its net income. 

19This subsection was originally published at 85 

FR 35550, subsection III.1. (June 11, 2020) and has 

been modified for readability. 

20Under the alternative size standard, a business 

concern, including a telephone cooperative, can 

qualify for the PPP as a small business concern if, 

as of March 27, 2020: (1) The maximum tangible net 

worth of the business was not more than $15 

million; and (2) the average net income after 

Federal income taxes (excluding any carry-over 

losses) of the business for the two full fiscal years 

before the date of the application is not more than 

$5 million. For a telephone cooperative that does 

not have net income, the telephone cooperative’s 

capital credits distributed to its owner-members 

will be considered its net income. 

21This subsection has been added to conform to 

section 316 of the Economic Aid Act. 

22This subsection has been added to conform to 

section 317 of the Economic Aid Act. 

23This subsection provides that an eligible 

nonprofit news organization under section 317 of 

the Economic Aid Act must have no more than 500 

employees. (For those nonprofit news organizations 

with more than one physical location, they must 

have no more than 500 employees per location.) 

This will make PPP loans available to nonprofit 

news organizations, regardless of whether the 

organization would be a business concern under 

SBA regulations, if the nonprofit news organization 

satisfies the same general size standard applicable 

under the PPP rules to other borrowers that are 

nonprofit or tax-exempt organizations. The 

Administrator, in consultation with the Secretary, 

has determined this requirement appropriately 

implements section 317 of the Economic Aid Act 

by making PPP loans available to nonprofit news 

organizations on the same terms as other nonprofit 

organizations that have been made eligible for PPP 

loans. 

24This subsection has been added to conform to 

section 318 of the Economic Aid Act. 

25Section 318 of the Economic Aid Act added the 

following definition to paragraph 7(a)(36)(A) of the 

Small Business Act (15 U.S.C. 636(a)(36)(A)): ‘‘(xv) 

the term ’destination marketing organization’ means 

a nonprofit entity that is—(I) an organization 

described in section 501(c) of the Internal Revenue 

Code of 1986 and exempt from tax under section 

501(a) of such Code; or (II) a State, or a political 

subdivision of a State (including any 

instrumentality of such entities)—(aa) engaged in 

marketing and promoting communities and 

facilities to businesses and leisure travelers through 

a range of activities, including—(AA) assisting with 

the location of meeting and convention sites; (BB) 

providing travel information on area attractions, 

lodging accommodations, and restaurants; (CC) 

providing maps; and (DD) organizing group tours of 

local historical, recreational, and cultural 

attractions; or (bb) that is engaged in, and derives 

the majority of the operating budget of the entity 

from revenue attributable to, providing live events. 

26A destination marketing organization that is a 

quasi-governmental entity or is a political 

subdivision of a State or local government, 

including any instrumentality of those entities, is 

eligible for a PPP loan notwithstanding the SBA 

regulation at 13 CFR 120.110(j), which states that 

government-owned entities (except for businesses 

owned or controlled by a Native American tribe) are 

not eligible for SBA financial assistance. 

27This subsection has been added to conform to 

section 318 of the Economic Aid Act. 

28This subsection was originally published at 85 

FR 20811, subsection III.2.a. (April 15, 2020), as 

Continued 

corresponding to its primary industry, if 

higher, or both tests in SBA’s 

‘‘alternative size standard.’’ 18

iv. Are telephone cooperatives that 

are exempt from federal income 

taxation under section 501(c)(12) of the 

Internal Revenue Code eligible for a PPP 

loan? 19

Yes. A telephone cooperative that is 

exempt from federal income taxation 

under section 501(c)(12) of the Internal 

Revenue Code will be considered to be 

‘‘a business entity organized for profit’’ 

for purposes of 13 CFR 121.105(a)(1). As 

a result, such entities are eligible PPP 

borrowers, as long as other eligibility 

requirements are met. To be eligible, a 

telephone cooperative must satisfy the 

employee-based size standard 

established in the CARES Act, SBA’s 

employee-based size standard 

corresponding to its primary industry, if 

higher, or both tests in SBA’s 

‘‘alternative size standard.’’ 20

v. Are housing cooperatives as 

defined in section 216(b) of the Internal 

Revenue Code eligible for PPP loans? 21

Yes. Housing cooperatives (as defined 

in section 216(b) of the Internal Revenue 

Code of 1986) that employ not more 

than 300 employees are eligible to apply 

for PPP loans as long as other eligibility 

requirements are met. In addition, the 

provisions applicable to affiliation, 

described in section 3, apply to housing 

cooperatives in the same manner as 

with respect to a small business 

concern. 

vi. Are nonprofit and tax-exempt 

news organizations eligible for PPP 

loans? 22

Yes. A public broadcasting entity (as 

defined in section 397(11) of the 

Communications Act of 1934 (47 U.S.C. 

397(11)) that is a nonprofit organization 

or any organization otherwise subject to 

section 511(a)(2)(B) of the Internal 

Revenue Code of 1986, and employs no 

more than 500 employees (or, if 

applicable, the size standard in number 

of employees established by SBA in 13 

CFR 121.201 for the entity’s industry) 

per location is eligible for a PPP loan if 

the organization has a trade or business 

that is assigned a NAICS code beginning 

with 511110 or 5151, and 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.23 See 

subsection B.1.f. for information on how 

the 500 employee limit applies to news 

organizations with more than one 

physical location. See section 3 for the 

applicability of SBA’s affiliation rules to 

news organizations. 

vii. Are destination marketing 

organizations eligible for PPP loans? 24

Yes. Under the Economic Aid Act, 

any destination marketing 

organization 25 is eligible to receive a 

PPP loan as long as other eligibility 

requirements are met and if: (1) The 

destination marketing organization does 

not receive more than 15 percent of its 

receipts from lobbying activities; (2) the 

lobbying activities of the destination 

marketing organization do not comprise 

more than 15 percent of the total 

activities of the organization; (3) the cost 

of the lobbying activities of the 

destination marketing organization did 

not exceed $1,000,000 during the most 

recent tax year of the destination 

marketing organization that ended prior 

to February 15, 2020; (4) the destination 

marketing organization employs not 

more than 300 employees; and (5) the 

destination marketing organization: (a) 

Is described in section 501(c) of the 

Internal Revenue Code and is exempt 

from taxation under section 501(a) of 

such Code; or (b) is a quasigovernmental entity or is a political 

subdivision of a State or local 

government, including any 

instrumentality of those entities.26

viii. Are 501(c)(6) organizations 

eligible for PPP loans? 27

Yes. Any organization that is 

described in section 501(c)(6) of the 

Internal Revenue Code and that is 

exempt from taxation under section 

501(a) of such Code (excluding 

professional sports leagues and 

organizations with the purpose of 

promoting or participating in a political 

campaign or other activity) shall be 

eligible to receive a PPP loan as long as 

other eligibility requirements are met 

and if: (1) The organization does not 

receive more than 15 percent of its 

receipts from lobbying activities; (2) the 

lobbying activities of the organization 

do not comprise more than 15 percent 

of the total activities of the organization; 

(3) the cost of the lobbying activities of 

the organization did not exceed 

$1,000,000 during the most recent tax 

year of the organization that ended prior 

to February 15, 2020; and (4) the 

organization employs not more than 300 

employees. 

2. What businesses, organizations, and 

individuals are ineligible? 

a. Could I be ineligible even if I meet 

the eligibility requirements in section 

1? 28


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3698 Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations 

amended by 85 FR 36308 (June 16, 2020), 85 FR 

36717 (June 18, 2020), and 85 FR 38301 (June 26, 

2020), and has been modified to conform to 

subsequent interim final rules or guidance and the 

Economic Aid Act and for readability. 

29Added to conform to section 310 of the 

Economic Aid Act. This provision is effective as if 

included in the CARES Act and applies to any loan 

made pursuant to section 7(a)(36) of the Small 

Business Act before, on, or after December 27, 2020, 

including forgiveness of such a loan. 

30Added to conform to section 310 of the 

Economic Aid Act. This provision applies to PPP 

loans made on or after December 27, 2020. 

31Added to conform to section 322 of the 

Economic Aid Act. This provision applies to any 

loan made on or after December 27, 2020. For any 

loan made under section 7(a)(36) to a covered entity 

before December 27, 2020, see subsection B.16 of 

this interim final rule. 

32Added to conform to section 342 of the 

Economic Aid Act, which also added the following 

definitions to paragraph 7(a)(36)(A) of the Small 

Business Act (15 U.S.C. 636(a)(36)(A)): ‘‘(xvi) 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)).’’ 

This provision applies to loans made on or after 

December 27, 2020. 

33See section 317 of the Economic Aid Act. 

34This provision prohibits an entity that has gone 

out of business and has no intention of reopening 

from receiving a PPP loan. The Administrator, in 

consultation with the Secretary, has determined 

this provision is necessary to maintain program 

integrity, prevent abuse, and prevent PPP loans 

being made to businesses that have permanently 

closed. Preserving funds for businesses in operation 

is necessary because only businesses that are still 

in operation will retain employees, which is a 

primary purposes of the PPP. PPP was not intended 

to support businesses that have permanently closed. 

A borrower that has temporarily closed or 

temporarily suspended its business but intends to 

reopen remains eligible for a PPP loan. 

35This subsection replaces the subsection 

originally published at 85 FR 20811, subsection 

III.2.c. (‘‘How do I determine if I am ineligible’’) 

(April 15, 2020) and modified to conform to the 

Economic Aid Act. 

36SOP 50 10 6 can be found at https://

www.sba.gov/document/sop-50-10-lenderdevelopment-company-loan-programs-0. For PPP 

loans approved before December 27, 2020, see SOP 

50 10 5(K), Subpart B, Chapter 2 for ineligible types 

of businesses. SOP 50 10 5(K) can be found at 

https://www.sba.gov/document/sop-50-10-5-lenderdevelopment-company-loan-programs. 

37This subsection was originally published at 85 

FR 23450, subsection III.4. (April 28, 2020) and has 

been modified for readability. 

38This subsection was originally published at 85 

FR 23450, subsection III.2.a. (April 28, 2020) and 

has been modified for readability. 

39The text of this subsection was originally 

published at 85 FR 20817 (April 15, 2020). 

40Paragraph 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, 

waives 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 North American Industry 

Classification System code beginning with 72; (2) 

any business concern operating as a franchise that 

is assigned a franchise identifier code by the 

Administration; (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 section 121.105 of title 

13, Code of Federal Regulations, or any successor 

thereto) that employs not more than 500 employees, 

or the size standard established by the 

Administrator for the North American Industry 

Classification System 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 

You are ineligible for a PPP loan if, for 

example: 

i. You are engaged in any activity that 

is illegal under Federal, state, or local 

law; 

ii. You are a household employer 

(individuals who employ household 

employees such as nannies or 

housekeepers); 

iii. An owner of 20 percent or more 

of the equity of the applicant is 

presently incarcerated or, for any felony, 

presently subject to an indictment, 

criminal information, arraignment, or 

other means by which formal criminal 

charges are brought in any jurisdiction; 

or has been convicted of, pleaded guilty 

or nolo contendere to, or commenced 

any form of parole or probation 

(including probation before judgment) 

for, a felony involving fraud, bribery, 

embezzlement, or a false statement in a 

loan application or an application for 

federal financial assistance within the 

last five years or any other felony within 

the last year; 

iv. You, or any business owned or 

controlled by you or any of your 

owners, has ever obtained a direct or 

guaranteed loan from SBA or any other 

Federal agency that is currently 

delinquent or has defaulted within the 

last seven years and caused a loss to the 

government; 

v. Your business or organization was 

not in operation on February 15, 

2020; 29

vi. You or your business received or 

will receive a grant under the Shuttered 

Venue Operator Grant program under 

section 324 of the Economic Aid Act; 30

vii. 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 

your business; 31

viii. Your business is 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) 32 (SBA will not consider 

whether a news organization that is 

eligible under the conditions described 

in subsection 1.f. and 1.g.vi. is affiliated 

with an entity, which includes any 

entity that owns or controls such news 

organization, that is an issuer 33); or 

ix. Your business has permanently 

closed.34

b. Are businesses that are generally 

ineligible for 7(a) loans under 13 CFR 

120.110 eligible for a PPP loan? 35

Paragraphs (a), (g), and (k), of 13 CFR 

120.110 do not apply to PPP loans. For 

PPP loans, the ineligibility restriction in 

13 CFR 120.110(n) is superseded by 

subsection B.2.a.iii. of this interim final 

rule. Otherwise, a business is not 

eligible for a PPP loan if it is a type of 

business concern (or would be, if the 

entity were a business concern) 

described in 13 CFR 120.110, except as 

permitted by subsections B.1.d and 

B.1.g of this rule or otherwise permitted 

by PPP rules. Businesses that are not 

generally eligible for a 7(a) loan under 

13 CFR 120.110 are described further in 

SBA’s Standard Operating Procedure 

(SOP) 50 10 6, Part 2, Section A, 

Chapter 3.36

c. Will I be approved for a PPP loan 

if my business is in bankruptcy? 37

No. If the applicant or the owner of 

the applicant is the debtor in a 

bankruptcy proceeding, either at the 

time it submits the application or at any 

time before the loan is disbursed, the 

applicant is ineligible to receive a PPP 

loan. If the applicant or the owner of the 

applicant becomes the debtor in a 

bankruptcy proceeding after submitting 

a PPP application but before the loan is 

disbursed, it is the applicant’s 

obligation to notify the lender and 

request cancellation of the application. 

Failure by the applicant to do so will be 

regarded as a use of PPP funds for 

unauthorized purposes. 

The Borrower Application Form for 

PPP loans (SBA Form 2483), which 

reflects this restriction in the form of a 

borrower certification, is a loan program 

requirement. Lenders may rely on an 

applicant’s representation concerning 

the applicant’s or an owner of the 

applicant’s involvement in a bankruptcy 

proceeding. 

d. Is a hedge fund or private equity 

firm eligible for a PPP loan? 38

No. Hedge funds and private equity 

firms are primarily engaged in 

investment or speculation, and such 

businesses are therefore ineligible to 

receive a PPP loan. 

3. Affiliation Rules Generally 

a. Are affiliates considered together 

for purposes of determining 

eligibility? 39

In most cases, a borrower will be 

considered together with its affiliates for 

purposes of determining eligibility for 

the PPP.40 Under SBA rules, entities 


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Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations 3699 

North American Industry Classification System 

code beginning with 511110 or 5151; or (b) any 

nonprofit organization that is assigned a North 

American Industry Classification System code 

beginning with 5151. This interim final rule has no 

effect on these statutory waivers, which remain in 

full force and effect. As a result, the affiliation rules 

contained in section 121.301 also do not apply to 

these types of entities. In addition, paragraph 

7(a)(36)(D) of the Small Business Act (15 U.S.C. 

636(a)(36)(D)), as amended by section 342 of the 

Economic Aid Act states that, with respect to a 

business concern made eligible under paragraph 

7(a)(36)(D)(iii)(II) or (iv)(IV) (certain news 

organizations), the Administrator shall not consider 

whether any affiliated entity, which for purposes of 

this subclause shall include any entity that owns or 

controls such business concern, is an issuer. 

41 In order to help potential borrowers identify 

other businesses with which they may be deemed 

to be affiliated under the common management 

standard, the Borrower Application Form, SBA 

Form 2483, released on April 2, 2020, requires 

applicants to list other businesses with which they 

have common management (including under a 

management agreement). The information supplied 

by the applicant in response to that information 

request should be used by applicants as they assess 

whether they have affiliates that should be included 

in their number of employees reported on SBA 

Form 2483. 

42The text of this subsection was originally 

published at 85 FR 20817 (April 15, 2020) and has 

been modified to conform to the Economic Aid Act. 

43For housing cooperatives, section 501(c)(6) 

organizations, and destination marketing 

organizations, the applicable size standard is not 

more than 300 employees. 

44The text of this subsection was originally 

published at 85 FR 20817 (April 15, 2020) and has 

been modified for readability. 

45This subsection was originally published at 85 

FR 23450, subsection III.2.b. (April 28, 2020). 

46However, the CARES Act waives the affiliation 

rules if the borrower receives financial assistance 

from an SBA-licensed Small Business Investment 

Company (SBIC) in any amount. This includes any 

type of financing listed in 13 CFR 107.50, such as 

loans, debt with equity features, equity, and 

guarantees. Affiliation is waived even if the 

borrower has investment from other non-SBIC 

investors. 

47This subsection was originally published at 85 

FR 23450, section III.3. (April 28, 2020) and has 

been modified for readability. 

48This subsection was originally published at 85 

FR 20811, subsection III.2.d. (April 15, 2020) and 

has been modified to conform to additional interim 

final rules or guidance and the Economic Aid Act. 

49See subsection 4.d. for maximum loan amount 

applicable to certain farmers and ranchers. For the 

maximum loan amount for Second Draw PPP 

Loans, see the the interim final rule on Second 

Draw PPP Loans that is being published separately. 

may be considered affiliates based on 

factors including but not limited to 

stock ownership, overlapping 

management,41 and identity of interest. 

See 13 CFR 121.301(f). 

b. How do SBA’s affiliation rules 

affect my eligibility and apply to me 

under the PPP? 42

An entity generally is eligible for the 

PPP if it, combined with its affiliates, (i) 

is a small business as defined in section 

3 of the Small Business Act (15 U.S.C. 

632), (ii)(1) has 500 or fewer 

employees 43 or is a business that 

operates in a certain industry and meets 

applicable SBA employee-based size 

standards for that industry, if higher, 

and (2) is a tax-exempt nonprofit 

organization described in section 

501(c)(3) of the Internal Revenue Code 

(IRC), a housing cooperative, a taxexempt veterans organization described 

in section 501(c)(19) of the IRC, a Tribal 

business concern described in section 

31(b)(2)(C) of the Small Business Act, a 

section 501(c)(6) organization, a 

destination marketing organization, or 

any other business concern, or (iii) has 

500 or fewer employees per location (or 

an applicable SBA employee-based size 

standard for that industry, if higher) and 

is either majority owned or controlled 

by a NAICS code 511110 or 5151 

business or is a nonprofit public 

broadcasting entity with a trade or 

business under NAICS code 511110 or 

5151. Prior to the CARES Act, the 

nonprofit organizations listed above 

were not eligible for SBA Business Loan 

Programs under section 7(a) of the Small 

Business Act; only for-profit small 

business concerns were eligible. The 

CARES Act made such nonprofit 

organizations not only eligible for the 

PPP, but also subjected them to SBA’s 

affiliation rules. As amended, section 

7(a) of the Small Business Act (15 U.S.C. 

636(a)) now provides that the provisions 

applicable to affiliations under 13 CFR 

121.103 apply with respect to nonprofit 

organizations, housing cooperatives, 

and veterans organizations in the same 

manner as with respect to small 

business concerns. However, the 

detailed affiliation standards contained 

in § 121.103 currently do not apply to 

PPP borrowers, because § 121.103(a)(8) 

provides that applicants in SBA’s 

Business Loan Programs (which include 

the PPP) are subject to the affiliation 

rules contained in 13 CFR 121.301. 

c. Faith-Based Organizations 44

This rule exempts otherwise qualified 

faith-based organizations from the 

SBA’s affiliation rules, including those 

set forth in 13 CFR part 121, where the 

application of the affiliation rules would 

substantially burden those 

organizations’ religious exercise. For the 

reasons described in 85 FR 20817, the 

SBA’s affiliation rules, including those 

set forth in 13 CFR part 121, do not 

apply to the relationship of any church, 

convention or association of churches, 

or other faith-based organization or 

entity to any other person, group, 

organization, or entity that is based on 

a sincere religious teaching or belief or 

otherwise constitutes a part of the 

exercise of religion. This includes any 

relationship to a parent or subsidiary 

and other applicable aspects of 

organizational structure or form. A faithbased organization seeking loans under 

this program may rely on a reasonable, 

good faith interpretation in determining 

whether its relationship to any other 

person, group, organization, or entity is 

exempt from the affiliation rules under 

this provision, and SBA will not assess, 

and will not require participating 

lenders to assess, the reasonableness of 

the faith-based organization’s 

determination. 

d. Do the SBA affiliation rules 

prohibit a portfolio company of a 

private equity fund from being eligible 

for a PPP loan? 45

Borrowers must apply the affiliation 

rules that appear in 13 CFR 121.301(f), 

as set forth in the Second PPP Interim 

Final Rule (85 FR 20817). The affiliation 

rules apply to private equity-owned 

businesses in the same manner as any 

other business subject to outside 

ownership or control.46 However, in 

addition to applying any applicable 

affiliation rules, all borrowers should 

carefully review the required 

certification on the Paycheck Protection 

Program Borrower Application Form 

(SBA Form 2483) stating that ‘‘[c]urrent 

economic uncertainty makes this loan 

request necessary to support the 

ongoing operations of the Applicant.’’ 

e. Does participation in an employee 

stock ownership plan (ESOP) trigger 

application of the affiliation rules? 47

No. For purposes of the PPP, a 

business’s participation in an ESOP (as 

defined in 15 U.S.C. 632(q)(6)) does not 

result in an affiliation between the 

business and the ESOP. 

4. I Have Determined That I Am Eligible. 

How much can I borrow? 48

Under the PPP, the maximum loan 

amount for First Draw PPP Loans is the 

lesser of $10 million or an amount that 

you will calculate using a payroll-based 

formula authorized by the Act, as 

explained below.49 PPP loans approved 

in 2020 used 2019 or the 1-year before 

the date on which the loan is made to 

calculate payroll costs for purposes of 

calculating the maximum loan amount. 

Borrowers who apply for PPP loans 

2021 and 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. Since 

most borrowers will use 2019 or 2020 

the rule text refers only to 2019 or 2020 

for simplicity and readability. 


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50This subsection was originally published at 85 

FR 20811, subsection III.2.d. (April 15, 2020) and 

has been modified to conform to additional rules or 

guidance and the Economic Aid Act. 

51See subsection 4.j for treatment of amounts 

paid to independent contractors. 

52This subsection clarifies the documentation 

that must be submitted with an applicant’s loan 

application to substantiate the borrower’s payroll 

costs. This requirement applies to loans made after 

December 27, 2020. For documentation 

requirements for PPP loans made before December 

27, 2020, see 85 FR 20811, subsection III.1.e. (April 

15, 2020). 

53This subsection was originally published at 85 

FR 21747, subsection III.1.b. (April 20, 2020) and 

has been modified to conform to additional rules or 

guidance and the Economic Aid Act. 

a. How do I calculate the maximum 

amount I can borrow? 50

The following methodology, which is 

one of the methodologies authorized by 

the Act, will be most useful for many 

applicants. 

i. Step 1: Aggregate payroll costs 

(defined in detail below in subsections 

4.g. and 4.h.) from 2019 or 2020 for 

employees whose principal place of 

residence is the United States. 

ii. Step 2: Subtract any compensation 

paid to an employee in excess of 

$100,000 on an annualized basis, as 

prorated for the period during which the 

payments are made or the obligation to 

make the payments is incurred.51

iii. Step 3: Calculate average monthly 

payroll costs (divide the amount from 

Step 2 by 12). 

iv. Step 4: Multiply the average 

monthly payroll costs from Step 3 by 

2.5. 

v. Step 5: Add the outstanding 

amount of an Economic Injury Disaster 

Loan (EIDL) made between January 31, 

2020 and April 3, 2020 that you seek to 

refinance. Do not include the amount of 

any ‘‘advance’’ under an EIDL COVID– 

19 loan (because it does not have to be 

repaid). 

The examples below illustrate this 

methodology. 

i. Example 1—No employees make more 

than $100,000 

Annual payroll: $120,000 

Average monthly payroll: $10,000 

Multiply by 2.5 = $25,000 

Maximum loan amount is $25,000 

ii. Example 2—Some employees make 

more than $100,000 

Annual payroll: $1,500,000 

Subtract compensation amounts in 

excess of an annual salary of 

$100,000: $1,200,000 

Average monthly qualifying payroll: 

$100,000 

Multiply by 2.5 = $250,000 

Maximum loan amount is $250,000 

iii. Example 3—No employees make 

more than $100,000, outstanding 

EIDL loan of $10,000. 

Annual payroll: $120,000 

Average monthly payroll: $10,000 

Multiply by 2.5 = $25,000 

Add EIDL loan of $10,000 = $35,000 

Maximum loan amount is $35,000 

iv. Example 4—Some employees make 

more than $100,000, outstanding 

EIDL loan of $10,000 

Annual payroll: $1,500,000 

Subtract compensation amounts in 

excess of an annual salary of 

$100,000: $1,200,000 

Average monthly qualifying payroll: 

$100,000 

Multiply by 2.5 = $250,000 

Add EIDL loan of $10,000 = $260,000 

Maximum loan amount is $260,000 

You must provide your 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 you used to calculate loan 

amount), or equivalent payroll processor 

records, along with evidence of any 

retirement and health insurance 

contributions. A payroll statement or 

similar documentation from the pay 

period that covered February 15, 2020 

must be provided to establish you were 

in operation on February 15, 2020.52

b. I have income from selfemployment and file a Form 1040, 

Schedule C, how do I calculate the 

maximum amount I can borrow and 

what documentation is required?53

How you calculate your maximum 

loan amount depends upon whether or 

not you employ other individuals. If you 

have no employees, the following 

methodology should be used to 

calculate your maximum loan amount: 

i. Step 1: Find your 2019 or 2020 IRS 

Form 1040 Schedule C line 31 net profit 

amount (if you are using 2020 to 

calculate payroll costs and have not yet 

filed a 2020 return, fill it out and 

compute the value). If this amount is 

over $100,000, reduce it to $100,000. If 

this amount is zero or less, you are not 

eligible for a PPP loan. 

ii. Step 2: Calculate the average 

monthly net profit amount (divide the 

amount from Step 1 by 12). 

iii. Step 3: Multiply the average 

monthly net profit amount from Step 2 

by 2.5. 

iv. Step 4: Add the outstanding 

amount of any Economic Injury Disaster 

Loan (EIDL) made between January 31, 

2020 and April 3, 2020 that you seek to 

refinance. Do not include the amount of 

any advance under an EIDL COVID–19 

loan (because it does not have to be 

repaid). 

You must provide the 2019 or 2020 

(whichever you used to calculate loan 

amount) Form 1040 Schedule C with 

your PPP loan application to 

substantiate the applied-for PPP loan 

amount and a 2019 or 2020 (whichever 

you used to calculate loan amount) IRS 

Form 1099–MISC detailing 

nonemployee compensation received 

(box 7), invoice, bank statement, or book 

of record that establishes you are selfemployed. If using 2020 to calculate 

loan amount, this is required regardless 

of whether you have filed a 2020 tax 

return with the IRS. You must provide 

a 2020 invoice, bank statement, or book 

of record to establish you were in 

operation on or around February 15, 

2020. 

If you have employees, the following 

methodology should be used to 

calculate your maximum loan amount: 

i. Step 1: Compute 2019 or 2020 

payroll (using the same year for all 

items) by adding the following: 

a. Your 2019 or 2020 Form 1040 

Schedule C line 31 net profit amount (if 

you are using 2020 and have not yet 

filed a 2020 return, fill it out and 

compute the value), up to $100,000 on 

an annualized basis, as prorated for the 

period during which the payments are 

made or the obligation to make the 

payments is incurred, if this amount is 

over $100,000, reduce it to $100,000, if 

this amount is less than zero, set this 

amount at zero; 

b. 2019 or 2020 gross wages and tips 

paid to your employees whose principal 

place of residence is in the United 

States computed using 2019 or 2020 IRS 

Form 941 Taxable Medicare wages & 

tips (line 5c—column 1) from each 

quarter plus any pre-tax employee 

contributions for health insurance or 

other fringe benefits excluded from 

Taxable Medicare wages & tips; subtract 

any amounts paid to any individual 

employee in excess of $100,000 on an 

annualized basis, as prorated for the 

period during which the payments are 

made or the obligation to make the 

payments is incurred and any amounts 

paid to any employee whose principal 

place of residence is outside the United 

States; and 

c. 2019 or 2020 employer 

contributions to employee group health, 

life, disability, vision and dental 

insurance (portion of IRS Form 1040 

Schedule C line 14 attributable to those 

contributions); retirement contributions 

(Form 1040 Schedule C line 19), and 

state and local taxes assessed on 

employee compensation (primarily 

under state laws commonly referred to 

as the State Unemployment Tax Act or 

SUTA from state quarterly wage 

reporting forms). 

ii. Step 2: Calculate the average 

monthly amount (divide the amount 

from Step 1 by 12). 


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54This subsection has been added to conform to 

section 336 of the Economic Aid Act. Except for 

loans made pursuant to section 7(a)(36) of the Small 

Business Act for which SBA has remitted a loan 

forgiveness payment to the lender before December 

27, 2020, it is effective as if included in the CARES 

Act and applies to any loan made before, on, or 

after December 27, 2020, including forgiveness of 

such a loan. Previous guidance issued for seasonal 

employers stated as follows: ‘‘Under section 1102 

of the CARES Act, a seasonal employer may 

determine its maximum loan amount for purposes 

of the PPP by reference to the employer’ average 

total monthly payments for payroll ‘the 12-week 

period beginning February 15, 2019, or at the 

election of the eligible [borrower], March 1, 2019, 

and ending June 30, 2019.’ Under this interim final 

rule issued pursuant to section 1109 of the Act, a 

seasonal employer may alternatively elect to 

determine its maximum loan amount as the average 

total monthly payments for payroll during any 

consecutive 12-week period between May 1, 2019 

and September 15, 2019.’’ 85 FR 23917 (April 30, 

2020). 

55This subsection has been added to conform to 

section 313 of the Economic Aid Act. This 

provision applies to a farmer or rancher who (1) 

operates as a sole proprietorship, an independent 

contractor, or is an eligible self-employed 

individual; (2) reports farm income or expenses on 

a Schedule F (or any equivalent successor 

schedule); and (3) was in business as of February 

15, 2020. This provision is effective as if included 

in the CARES Act and applies to any loan made 

before, on, or after December 27, 2020, unless SBA 

has remitted a loan forgiveness payment to the 

lender on the PPP loan. 

56Any 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. 

iii. Step 3: Multiply the average 

monthly amount from Step 2 by 2.5. 

iv. Step 4: Add the outstanding 

amount of any EIDL made between 

January 31, 2020 and April 3, 2020 that 

you seek to refinance. Do not include 

the amount of any advance under an 

EIDL COVID–19 loan (because it does 

not have to be repaid). 

You must supply your 2019 or 2020 

(whichever you used to calculate loan 

amount) 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 you used to 

calculate loan amount) or equivalent 

payroll processor records, along with 

evidence of any retirement and health 

insurance contributions, if applicable. A 

payroll statement or similar 

documentation from the pay period that 

covered February 15, 2020 must be 

provided to establish you were in 

operation on February 15, 2020. 

c. How does a seasonal employer 

calculate the maximum PPP loan 

amount? 54

As defined by section 315 of the 

Economic Aid Act, a borrower is a 

seasonal employer if it does not operate 

for more than 7 months in any calendar 

year or, during the preceding calendar 

year, it had gross receipts for any 6 

months of that year that were not more 

than 33.33 percent of the gross receipts 

for the other 6 months of that year. 

Under section 336 of the Economic Aid 

Act, a seasonal employer must 

determine its maximum loan amount for 

purposes of the PPP by using the 

employer’s average total monthly 

payments for payroll for any 12-week 

period selected by the seasonal 

employer beginning February 15, 2019, 

and ending February 15, 2020. 

d. How do farmers and ranchers 

calculate the maximum PPP loan 

amount? 55

How you calculate your maximum 

loan amount depends upon whether you 

employ other individuals. If you have 

no employees, the following 

methodology should be used to 

calculate your maximum loan amount: 

i. Step 1: Find your 2019 or 2020 IRS 

Form 1040 Schedule F line 9 gross 

income (if you are using 2020 and you 

have not yet filed a 2020 return, fill it 

out and compute the value). If this 

amount is over $100,000, reduce it to 

$100,000. If this amount is zero or less, 

you are not eligible for a PPP loan. 

ii. Step 2: Divide the amount from 

Step 1 by 12. 

iii. Step 3: Multiply the average 

monthly gross income amount from 

Step 2 by 2.5. 

iv. Step 4: Add the outstanding 

amount of any Economic Injury Disaster 

Loan (EIDL) made between January 31, 

2020 and ending on April 3, 2020 that 

you seek to refinance. Do not include 

the amount of any advance under an 

EIDL COVID–19 loan (because it does 

not have to be repaid). 

You must provide the 2019 or 2020 

(whichever you used to calculate loan 

amount) Form 1040 Schedule F with 

your PPP loan application to 

substantiate the applied-for PPP loan 

amount and a 2019 or 2020 (whichever 

you used to calculate loan amount) IRS 

Form 1099–MISC detailing 

nonemployee compensation received 

(box 7), invoice, bank statement, or book 

of record that establishes you are selfemployed. You must provide a 2020 

invoice, bank statement, or book of 

record to establish you were in 

operation on or around February 15, 

2020. 

If you have employees, the following 

methodology should be used to 

calculate your maximum loan amount: 

i. Step 1: Compute 2019 or 2020 

payroll (using the same year for all 

items) by adding the following: 

a. The difference between your 2019 

or 2020 Form 1040 Schedule F line 9 

gross income amount (if you are using 

2020 and you have not yet filed a 2020 

return, fill it out and compute the 

value), and the sum of Schedule F lines 

15, 22 and 23, up to $100,000 on an 

annualized basis, as prorated for the 

period during which the payments are 

made or the obligation to make the 

payments is incurred, if this amount is 

over $100,000, reduce it to $100,000, if 

this amount is less than zero, set this 

amount at zero; 56

b. 2019 or 2020 gross wages and tips 

paid to your employees whose principal 

place of residence is in the United 

States computed using 2019 or 2020 IRS 

Form 941 Taxable Medicare wages & 

tips (line 5c—column 1) from each 

quarter plus any pre-tax employee 

contributions for health insurance or 

other fringe benefits excluded from 

Taxable Medicare wages & tips; subtract 

any amounts paid to any individual 

employee in excess of $100,000 on an 

annualized basis, as prorated for the 

period during which the payments are 

made or the obligation to make the 

payments is incurred and any amounts 

paid to any employee whose principal 

place of residence is outside the United 

States; and 

c. 2019 or 2020 employer 

contributions for employee group 

health, life, disability, vision and dental 

insurance (portion of IRS Form 1040 

Schedule F line 15 attributable to those 

contributions), employer contributions 

for employee retirement contributions 

(Form 1040 Schedule F line 23, and 

state and local taxes assessed on 

employers for employee compensation 

(primarily under state laws commonly 

referred to as the State Unemployment 

Tax Act or SUTA from state quarterly 

wage reporting forms). 

ii. Step 2: Calculate the average 

monthly amount (divide the amount 

from Step 1 by 12). 

iii. Step 3: Multiply the average 

monthly amount from Step 2 by 2.5. 

iv. Step 4: Add the outstanding 

amount of any EIDL made between 

January 31, 2020 and April 3, 2020 that 

you seek to refinance. Do not include 

the amount of any advance under an 

EIDL COVID–19 loan (because it does 

not have to be repaid). 

You must supply your 2019 or 2020 

(whichever you used to calculate loan 

amount) Form 1040 Schedule F, 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 you used to 

calculate loan amount) or equivalent 


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3702 Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations 

57This treatment follows the computation of selfemployment 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. 

58This subsection was originally published at 85 

FR 26324, subsection III.1. (May 4, 2020). 

59The Administrator has authority to issue ‘‘such 

rules and regulations as [the Administrator] deems 

necessary to carry out the authority vested in [her] 

by or pursuant to’’ 15 U.S.C. Chapter 14A, 

including authorities established under section 

1102 of the CARES Act. Section 1102 provides that 

the Administrator ‘‘may’’ guarantee loans under the 

terms and conditions set forth in section 7(a) of the 

Small Business Act, and those conditions specify a 

‘‘maximum’’—but not a minimum—loan amount. 

See 15 U.S.C. 636(a)(36)(B), (E); see also CARES Act 

section 1106(k) (authorizing SBA to issue 

regulations to govern loan forgiveness). To preserve 

finite appropriations for PPP loans and ensure 

broad access for eligible borrowers, the 

Administrator, in consultation with the Secretary, 

has determined that an aggregate limitation on 

loans to a single corporate group is necessary and 

appropriate. 

60See Section 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; 13 CFR 121.103(b). 

61This subsection was originally published at 85 

FR 20811, subsection III.2.f. (April 15, 2020) and 

has been modified to conform to the Economic Aid 

Act. 

payroll processor records, along with 

evidence of any retirement and health 

insurance contributions, if applicable. A 

payroll statement or similar 

documentation from the pay period that 

covered February 15, 2020 must be 

provided to establish you were in 

operation on February 15, 2020. 

A farmer or rancher who received a 

PPP loan before December 27, 2020 may 

request a recalculation of the maximum 

loan amount based on the formula 

described above regarding gross income, 

if doing so would result in a larger 

covered loan amount and may receive 

an increase in its PPP loan based on the 

recalculation. 

e. How do partnerships calculate the 

maximum loan amount? 

The following methodology should be 

used to calculate the maximum amount 

that partnerships can borrow: 

(i) Step 1: Compute 2019 or 2020 

payroll (using the same year for all 

items) by adding (1) net earnings from 

self-employment of individual general 

partners in 2019 or 2020, 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 

0.9235,57 that is not more than $100,000 

per partner; (2) 2019 or 2020 gross 

wages and tips paid to your employees 

whose principal place of residence is in 

the United States, if any, which can be 

computed using 2019 or 2020 IRS Form 

941 Taxable Medicare wages and tips 

(line 5c—column 1) from each quarter 

plus any pre-tax employee contributions 

for health insurance or other fringe 

benefits excluded from Taxable 

Medicare wages and tips, subtracting 

any amounts paid to any individual 

employee in excess of $100,000 and any 

amounts paid to any employee whose 

principal place of residence is outside 

the U.S.; (3) 2019 or 2020 employer 

contributions for employee group 

health, life, disability, vision and dental 

insurance, if any (portion of IRS Form 

1065 line 19 attributable to those 

contributions); (4) 2019 or 2020 

employer contributions to employee 

retirement plans, if any (IRS Form 1065 

line 18); and (5) 2019 or 2020 employer 

state and local taxes assessed on 

employee compensation, primarily state 

unemployment insurance tax (from state 

quarterly wage reporting forms), if any. 

(ii) Step 2: Calculate the average 

monthly payroll costs (divide the 

amount from Step 1 by 12). 

(iii) Step 3: Multiply the average 

monthly payroll costs from Step 2 by 

2.5. 

(iv) Step 4: Add any outstanding 

amount of any EIDL made between 

January 31, 2020 and April 3, 2020 that 

you seek to refinance. Do not include 

the amount of any advance under an 

EIDL COVID–19 loan (because it does 

not have to be repaid). 

You must supply 2019 or 2020 

(whichever you used to calculate loan 

amount) IRS Form 1065 (including K– 

1s) and other relevant supporting 

documentation if the partnership has 

employees, including the 2019 or 2020 

(whichever you used to calculate loan 

amount) IRS Form 941 and state 

quarterly wage unemployment 

insurance tax reporting form from each 

quarter (or equivalent payroll processor 

records or IRS Wage and Tax 

Statements) along with records of any 

retirement or health insurance 

contributions. If the partnership has 

employees, a payroll statement or 

similar documentation from the pay 

period that covered February 15, 2020 

must be provided to establish the 

partnership was in operation and had 

employees on that date. If the 

partnership has no employees, an 

invoice, bank statement, or book of 

record establishing the partnership was 

in operation on February 15, 2020 must 

instead be provided. 

f. Can a single corporate group receive 

unlimited PPP loans? 58

No. To preserve the limited resources 

available to the PPP program, and in 

light of the previous lapse of PPP 

appropriations and the high demand for 

PPP loans, businesses that are part of a 

single corporate group shall in no event 

receive more than $20,000,000 of PPP 

loans in the aggregate.59 For purposes of 

this limit, businesses are part of a single 

corporate group if they are majority 

owned, directly or indirectly, by a 

common parent. 

It is the responsibility of an applicant 

for a PPP loan to notify the lender if the 

applicant has applied for or received 

PPP loans in excess of the amount 

permitted by this interim final rule and 

withdraw or request cancellation of any 

pending PPP loan application or 

approved PPP loan not in compliance 

with the limitation set forth in this rule. 

Failure by the applicant to do so will be 

regarded as a use of PPP funds for 

unauthorized purposes, and the loan 

will not be eligible for forgiveness. A 

lender may rely on an applicant’s 

representation concerning the 

applicant’s compliance with this 

limitation. 

The Administrator, in consultation 

with the Secretary, determined that 

limiting the amount of 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 

Act. The Administrator has concluded 

that a limitation of $20,000,000 strikes 

an appropriate balance between broad 

availability of PPP loans and program 

resource constraints. 

SBA’s affiliation rules, which relate to 

an applicant’s eligibility for PPP loans, 

and any waiver of those rules under the 

CARES Act, continue to apply 

independent of this limitation. 

Businesses are subject to this limitation 

even if the businesses are eligible for the 

waiver-of-affiliation provision under the 

CARES Act or are otherwise not 

considered to be affiliates under SBA’s 

affiliation rules.60

This rule has no effect on lender 

obligations required to obtain an SBA 

guarantee for PPP loans. 

g. What qualifies as ‘‘payroll 

costs? ’’ 61

Payroll costs consist of compensation 

to employees (whose principal place of 

residence is the United States) in the 

form of salary, wages, commissions, or 

similar compensation; cash tips or the 

equivalent (based on employer records 

of past tips or, in the absence of such 

records, a reasonable, good-faith 

employer estimate of such tips); 

payment for vacation, parental, family, 

medical, or sick leave; allowance for 

separation or dismissal; payment for the 

provision of employee benefits 

consisting of group health care or group 

life, disability, vision, or dental 


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62This provision has been modified to conform 

to section 308 of the Economic Aid Act. This 

revision is effective as if included in the CARES Act 

and applies to any loan made before, on, or after 

December 27, 2020, including forgiveness of such 

a loan. 

63This subsection was originally published at 85 

FR 20811, subsection III.2.g. (April 15, 2020) and 

has been modified to conform to section 344 the 

Economic Aid Act. 

64This subsection was originally published at 85 

FR 39066, subsection III.1. (June 30, 2020) and has 

been modified to conform to section 344 the 

Economic Aid Act and for readability. 

65This subsection was originally published at 85 

FR 20811, subsection III.2.h. (April 15, 2020). 

66See subsection 4.i. regarding fishing boat 

owners including payroll costs for their 

crewmembers in the calculation of the PPP loan 

amount. 

67This subsection was originally published at 85 

FR 27287, section III.2. (May 8, 2020) and has been 

modified for readability. 

68The Department of Education’s Federal WorkStudy Programs described at 34 CFR part 675 are 

(1) the Federal Work-Study Program, (2) the Job 

Location and Development Program, and (3) Work 

Colleges Program. 

69This subsection was originally published at 85 

FR 20811, subsection III.2.i. (April 15, 2020) and 

has been modified to conform to additional interim 

final rules or guidance and the Economic Aid Act. 

70Revised to conform to section 339 of the 

Economic Aid Act. The revision applies to PPP 

loans made on or after December 27, 2020, but may 

apply with respect to a PPP loan made before that 

date upon the mutual agreement of the lender and 

the borrower. A one percent interest rate provides 

low cost funds to borrowers to meet eligible payroll 

costs and other eligible expenses during this 

temporary period of economic dislocation caused 

by the coronavirus. Second, for lenders, the 100 

basis points offers an attractive interest rate relative 

to the cost of funding for comparable maturities. 

71This subsection was originally published at 85 

FR 36308, subsection III.1.b. (June 16, 2020) and has 

been modified for readability. 

72This subsection was originally published at 85 

FR 20811, subsection III.2.i. (‘‘Can I apply for more 

than one PPP loan?’’) (April 15, 2020) and has been 

modified to conform to the Economic Aid Act and 

for readability. PPP borrowers may be eligible for 

a loan under section 7(a)(37) of the Small Business 

Act, ‘‘Paycheck Protection Program Second Draw 

Loans,’’ see interim final rule on Second Draw PPP 

Loans that is being published separately. 

73See interim final rule on Second Draw PPP 

Loans for eligibility criteria for Second Draw PPP 

Loans, which is being published separately. 

74This subsection was originally published at 85 

FR 20811, subsection III.2.l. (April 15, 2020). 

75This subsection was originally published at 85 

FR 20811, subsection III.2.n. (April 15, 2020), as 

amended by 85 FR 36038 (June 16, 2020), and has 

been modified to conform to the Economic Aid Act. 

insurance,62 including insurance 

premiums, and retirement; payment of 

state and local taxes assessed on 

compensation of employees; and for an 

independent contractor or sole 

proprietor, wages, commissions, 

income, or net earnings from selfemployment, or similar compensation. 

h. Is there anything that is expressly 

excluded from the definition of payroll 

costs? 63

Yes. The Act expressly excludes the 

following: 

i. Any compensation of an employee 

whose principal place of residence is 

outside of the United States; 

ii. The compensation of an individual 

employee in excess of $100,000 on an 

annualized basis, as prorated for the 

period during which the payments are 

made or the obligation to make the 

payments is incurred; 

iii. Federal employment taxes 

imposed or withheld during the 

applicable period, including the 

employee’s and employer’s share of 

FICA (Federal Insurance Contributions 

Act) and Railroad Retirement Act taxes, 

and income taxes required to be 

withheld from employees; and 

iv. Qualified sick and family leave 

wages for which a credit is allowed 

under sections 7001 and 7003 of the 

Families First Coronavirus Response 

Act (Pub. L. 116–127). 

i. May fishing boat owners include 

payroll costs in their PPP loan 

applications that are attributable to 

crewmembers described in section 

3121(b)(20) of the Internal Revenue 

Code? 64

Yes. A fishing boat owner may 

include compensation reported on Box 

5 of IRS Form 1099–MISC and paid to 

a crewmember described in section 

3121(b)(20) of the Code, up to $100,000 

on an annualized basis, as prorated for 

the period during which the payments 

are made or the obligation to make the 

payments is incurred, as a payroll cost 

in its PPP loan application. 

j. Do independent contractors count 

as employees for purposes of PPP loan 

calculations? 65

No, independent contractors have the 

ability to apply for a PPP loan on their 

own so they do not count for purposes 

of a borrower’s PPP loan calculation.66

k. Do student workers count when 

determining the number of employees 

for PPP loan eligibility? 67

Yes. Student workers generally count 

as employees, unless (a) the applicant is 

an institution of higher education, as 

defined in the Department of 

Education’s Federal Work-Study 

regulations, 34 CFR 675.2, and (b) the 

student worker’s services are performed 

as part of a Federal Work-Study Program 

(as defined in those regulations 68) or a 

substantially similar program of a State 

or political subdivision thereof. 

Institutions of higher education must 

exclude work study students when 

determining the number of employees 

for PPP loan eligibility, and must also 

exclude payroll costs for work study 

students from the calculation of payroll 

costs used to determine their PPP loan 

amount. 

5. What is the interest rate on a PPP 

loan? 69

The interest rate will be 100 basis 

points or one percent, calculated on a 

non-compounding, non-adjustable 

basis.70

6. What will be the maturity date on a 

PPP loan? 71

The maturity is five years. 

7. Can I apply for more than one First 

Draw PPP Loan? 72

No. Except as set forth in subsection 

D.8, the Administrator, in consultation 

with the Secretary, determined that no 

eligible borrower may receive more than 

one First Draw PPP Loan. This means 

that if you apply for a PPP loan you 

should consider applying for the 

maximum amount. Any borrower who 

received a PPP loan in 2020 received a 

First Draw PPP Loan and is not eligible 

to receive another First Draw PPP Loan, 

but may be eligible for a second draw 

PPP loan.73

8. Can I use e-signatures or e-consents 

if a borrower has multiple owners? 74

Yes, e-signature or e-consents can be 

used regardless of the number of 

owners. 

9. When will I have to begin paying 

principal and interest on my PPP 

loan? 75

If you submit to your lender a loan 

forgiveness application within 10 

months after the end of your loan 

forgiveness covered period, you will not 

have to make any payments of principal 

or interest on your loan before the date 

on which SBA remits the loan 

forgiveness amount on your loan to your 

lender (or notifies your lender that no 

loan forgiveness is allowed). 

Your ‘‘loan forgiveness covered 

period’’ is the period beginning on the 

date the lender disburses the PPP loan 

and ending on any date selected by the 

borrower that occurs during the period 

(i) beginning on the date that is 8 weeks 

after the date of disbursement and (ii) 

ending on the date that is 24 weeks after 

the date of disbursement. Your lender 

must notify you of remittance by SBA of 

the loan forgiveness amount (or notify 

you that SBA determined that no loan 

forgiveness is allowed) and the date 

your first payment is due. Interest 

continues to accrue during the 

deferment period. 

If you do not submit to your lender a 

loan forgiveness application within 10 


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3704 Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations 

76This subsection was originally published at 85 

FR 20811, subsection III.2.q. (April 15, 2020). 

77This subsection was originally published at 85 

FR 20811, subsection III.2.r. (April 15, 2020), as 

amended by 85 FR 36308 (June 16, 2020) and has 

been modified to conform to the Economic Aid Act. 

78Under paragraph 7(a)(36)(Q) of the Small 

Business Act, as amended by section 341 of the 

Economic Aid Act, an EIDL loan used for purposes 

other than paying payroll costs and other eligible 

PPP expenditures is not considered a duplication of 

the assistance available under the PPP. 

79 Items viii. through xi. were added to conform 

to section 304 of the Economic Aid Act. These 

provisions are effective as if included in the CARES 

Act and apply to any loan made before, on, or after 

December 27, 2020, including forgiveness of such 

loan, unless SBA has remitted a loan forgiveness 

payment to the lender on the PPP loan. 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. 

80This subsection was originally published at 85 

FR 21747, subsection III.1.d. (April 20, 2020) and 

has been modified to conform to the Economic Aid 

Act. 

months after the end of your loan 

forgiveness covered period, you must 

begin paying principal and interest after 

that period. For example, if a borrower’s 

PPP loan is disbursed on January 25, 

2021, the 24-week period ends on July 

12, 2021. If the borrower does not 

submit a loan forgiveness application to 

its lender by May 12, 2022, the borrower 

must begin making payments on or after 

May 12, 2022. 

10. What forms do I need and how do 

I submit an application for a PPP 

loan? 76

The applicant must submit Paycheck 

Protection Program Borrower 

Application Form (SBA Form 2483), or 

lender’s equivalent form, and payroll 

documentation, as described above. The 

lender must submit SBA Form 2484, 

Paycheck Protection Program Lender’s 

Application for 7(a) Loan Guaranty, 

electronically in accordance with 

program requirements and maintain the 

forms and supporting documentation in 

its files. 

11. How can PPP loans be used? 77

a. The proceeds of a PPP loan are to 

be used for: 

i. Payroll costs (as defined in the 

CARES Act, Economic Aid Act and this 

interim final rule); 

ii. costs related to the continuation of 

group health care, life, disability, vision, 

or dental benefits during periods of paid 

sick, medical, or family leave, and group 

health care, life, disability, vision, or 

dental insurance premiums; 

iii. mortgage interest payments (but 

not mortgage prepayments or principal 

payments); 

iv. rent payments; 

v. utility payments; 

vi. interest payments on any other 

debt obligations that were incurred 

before February 15, 2020; 

vii. refinancing an SBA EIDL loan 

made between January 31, 2020 and 

April 3, 2020; 78

viii. covered operations expenditures 

(payments for any business software or 

cloud computing service that facilitates 

business operations, product or service 

delivery, the processing, payment, or 

tracking of payroll expenses, human 

resources, sales and billing functions, or 

accounting or tracking of supplies, 

inventory, records and expenses); 79

ix. covered property damage costs 

(costs related to property damage and 

vandalism or looting due to public 

disturbances that occurred during 2020 

that was not covered by insurance or 

other compensation); 

x. covered supplier costs 

(expenditures made by a borrower to a 

supplier of goods for the supply of 

goods that—(A) are essential to the 

operations of the borrower at the time at 

which the expenditure is made; and (B) 

is made pursuant to a contract, order, or 

purchase order—(i) in effect at any time 

before the covered period with respect 

to the applicable covered loan; or (ii) 

with respect to perishable goods, in 

effect before or at any time during the 

covered period with respect to the 

applicable covered loan); and 

xi. covered worker protection 

expenditures ((A) operating or a capital 

expenditures to facilitate the adaptation 

of the business activities of an entity to 

comply with requirements established 

or guidance issued by the Department of 

Health and Human Services, the Centers 

for Disease Control, or the Occupational 

Safety and Health Administration, or 

any equivalent requirements established 

or guidance issued by a State or local 

government, during the period 

beginning on March 1, 2020 and ending 

the date on which the national 

emergency with respect to the COVID– 

19 expires related to the maintenance of 

standards for sanitation, social 

distancing, or any other worker or 

customer safety requirement related to 

COVID–19; (B) such expenditures may 

include—(i) the purchase, maintenance, 

or renovation of assets that create or 

expand—(I) a drive-through window 

facility; (II) an indoor, outdoor, or 

combined air or air pressure ventilation 

or filtration system; (III) a physical 

barrier such as a sneeze guard; (IV) an 

expansion of additional indoor, outdoor, 

or combined business space; (V) an 

onsite or offsite health screening 

capability; or (VI) other assets relating to 

the compliance with the requirements 

or guidance described in subparagraph 

(A), as determined by the Administrator 

in consultation with the Secretary of 

Health and Human Services and the 

Secretary of Labor; and (ii) the purchase 

of—(I) covered materials described in 

section 328.103(a) of title 44, Code of 

Federal Regulations, or any successor 

regulation; (II) particulate filtering 

facepiece respirators approved by the 

National Institute for Occupational 

Safety and Health, including those 

approved only for emergency use 

authorization; or (III) other kinds of 

personal protective equipment, as 

determined by the Administrator in 

consultation with the Secretary of 

Health and Human Services and the 

Secretary of Labor; and (C) such 

expenditures do not include residential 

real property or intangible property). 

At least 60 percent of the PPP loan 

proceeds shall be used for payroll costs. 

For purposes of determining the 

percentage of use of proceeds for payroll 

costs, the amount of any EIDL 

refinanced will be included. For 

purposes of loan forgiveness, however, 

the borrower will have to document the 

proceeds used for payroll costs in order 

to determine the amount of forgiveness. 

While the Act provides that PPP loan 

proceeds may be used for the purposes 

listed above and for other allowable 

uses described in section 7(a) of the 

Small Business Act (15 U.S.C. 636(a)), 

the Administrator believes that finite 

appropriations and the structure of the 

Act warrant a requirement that 

borrowers use a substantial portion of 

the loan proceeds for payroll costs, 

consistent with Congress’ overarching 

goal of keeping workers paid and 

employed. This percentage is consistent 

with the limitation on the forgiveness 

amount set forth in the Flexibility Act. 

This limitation on use of the loan funds 

will help to ensure that the finite 

appropriations available for these loans 

are directed toward payroll protection, 

as each loan that is issued depletes the 

appropriation, regardless of whether 

portions of the loan are later forgiven. 

b. How can PPP loans be used by 

individuals with income from selfemployment who file a Form 1040, 

Schedule C? 80

The proceeds of a PPP loan are to be 

used for the following. 

i. Owner compensation replacement, 

calculated based on 2019 or 2020 (using 

the same year that was used to calculate 

the loan amount) net profit as described 

in subsection 4.b. 

ii. Employee payroll costs (as defined 

in this interim final rule) for employees 

whose principal place of residence is in 


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Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations 3705 

81Under section 7(a)(36)(Q) of the Small Business 

Act, as amended by section 341 of the Economic 

Aid Act, an EIDL loan used for purposes other than 

paying payroll costs and other eligible PPP 

expenditures is not considered a duplication of the 

assistance available under the PPP. 

82 Items vi. through ix. were added to conform to 

section 304 of the Economic Aid Act. These 

provisions are effective as if included in the CARES 

Act and apply to any loan made before, on, or after 

December 27, 2020, including forgiveness of such 

loan, unless SBA has remitted a loan forgiveness 

payment to the lender on the PPP loan. 

83This subsection has been added to conform to 

section 319 of the Economic Aid Act. 

84This subsection was originally published at 85 

FR 20811, subsection III.2.s. (April 15, 2020). 

85This subsection was originally published at 85 

FR 20811, subsection III.2.s. (April 15, 2020), as 

amended by 85 FR 36308 (June 16, 2020) and has 

been modified to conform to the Economic Aid Act 

and the revised PPP Borrower Application Form 

(SBA Form 2483). 

86A representative of the applicant can certify for 

the business as a whole if the representative is 

legally authorized to do so. The certifications have 

been revised to conform to the Economic Aid Act 

and the revised PPP Borrower Application Form 

(SBA Form 2483). 

the United States, if you have 

employees. 

iii. Mortgage interest payments (but 

not mortgage prepayments or principal 

payments) on any business mortgage 

obligation on real or personal property 

(e.g., the interest on your mortgage for 

the warehouse you purchased to store 

business equipment or the interest on an 

auto loan for a vehicle you use to 

perform your business), business rent 

payments (e.g., the warehouse where 

you store business equipment or the 

vehicle you use to perform your 

business), and business utility payments 

(e.g., the cost of electricity in the 

warehouse you rent or gas you use 

driving your business vehicle). You 

must have claimed or be entitled to 

claim a deduction for such expenses on 

your 2019 or 2020 (whichever you used 

to calculate loan amount) Form 1040 

Schedule C for them to be a permissible 

use. For example, if you did not claim 

or are not entitled to claim utilities 

expenses on your 2019 or 2020 Form 

1040 Schedule C, you cannot use the 

proceeds for utilities. 

iv. Interest payments on any other 

debt obligations that were incurred 

before February 15, 2020 (such amounts 

are not eligible for PPP loan 

forgiveness). 

v. Refinancing an SBA EIDL loan 

made between January 31, 2020 and 

April 3, 2020 (maturity will be reset to 

PPP’s maturity of two years for PPP 

loans made before June 5, 2020 unless 

the borrower and lender mutually agree 

to extend the maturity of such loans to 

five years, or PPP’s maturity of five 

years for PPP loans made on or after 

June 5).81

vi. Covered operations expenditures, 

as defined in section 7A(a) of the Small 

Business Act, to the extent they is 

deductible on Form 1040 Schedule C. 

vii. Covered property damage costs, as 

defined in section 7A(a) of the Small 

Business Act, to the extent they is 

deductible on Form 1040 Schedule C. 

viii. Covered supplier costs, as 

defined in section 7A(a) of the Small 

Business Act, to the extent they is 

deductible on Form 1040 Schedule C. 

ix. Covered worker protection 

expenditures, as defined in section 

7A(a) of the Small Business Act, to the 

extent they is deductible on Form 1040 

Schedule C.82

The Administrator, in consultation 

with the Secretary, determined that it is 

appropriate to limit self-employed 

individuals’ (who file a Form 1040 

Schedule C) use of loan proceeds to 

those types of allowable uses for which 

the borrower made expenditures in 2019 

or 2020 or that were used on covered 

property damage, as defined in section 

7A(a). The Administrator has 

determined that this limitation on selfemployed individuals who file a Form 

1040 Schedule C is consistent with the 

borrower certification required by the 

Act; specifically, that the PPP loan is 

necessary ‘‘to support the ongoing 

operations’’ of the borrower. The 

Administrator and the Secretary thus 

believe that this limitation is consistent 

with the structure of the Act to maintain 

existing operations and payroll and not 

for business expansion. This limitation 

on the use of PPP loan proceeds will 

also help to ensure that the finite 

appropriations available for these loans 

are directed toward maintaining existing 

operations and payroll, as each loan that 

is made depletes the appropriation. 

c. Can PPP proceeds be used for 

lobbying activities or expenditures? 83

No. None of the proceeds of a PPP 

loan may be used for (1) lobbying 

activities, as defined in section 3 of the 

Lobbying Disclosure Act of 1995 (2 

U.S.C. 1602); (2) lobbying expenditures 

related to a State or local election; or (3) 

expenditures designed to influence the 

enactment of legislation, appropriations, 

regulation, administrative action, or 

Executive order proposed or pending 

before Congress or any State 

government, State legislature, or local 

legislature or legislative body. 

d. What happens if PPP loan funds 

are misused? 84

If you use PPP funds for unauthorized 

purposes, SBA will direct you to repay 

those amounts. If you knowingly use the 

funds for unauthorized purposes, you 

will be subject to additional liability 

such as charges for fraud. If one of your 

shareholders, members, or partners uses 

PPP funds for unauthorized purposes, 

SBA will have recourse against the 

shareholder, member, or partner for the 

unauthorized use. 

12. What certifications need to be 

made? 85

On the PPP borrower application, an 

authorized representative of the 

applicant must certify in good faith to 

all of the below: 86

i. The Applicant was in operation on 

February 15, 2020, has not permanently 

closed, and was either an eligible selfemployed individual, independent 

contractor, or sole proprietorship with 

no employees, or had employees for 

whom it paid salaries and payroll taxes 

or paid independent contractors, as 

reported on a Form 1099–MISC. 

ii. Current economic uncertainty 

makes this loan request necessary to 

support the ongoing operations of the 

applicant. 

iii. The funds will be used to retain 

workers and maintain payroll; or make 

payments for mortgage interest, rent, 

utilities, covered operations 

expenditures, covered property damage 

costs, covered supplier costs, and 

covered worker protection expenditures 

as specified under the Paycheck 

Protection Program Rules; I understand 

that if the funds are knowingly used for 

unauthorized purposes, the federal 

government may hold me legally liable 

such as for charges of fraud. (As 

explained above, not more than 40 

percent of loan proceeds may be used 

for nonpayroll costs.) 

iv. I understand that loan forgiveness 

will be provided for the sum of 

documented payroll costs, covered 

mortgage interest payments, covered 

rent payments, covered utilities, 

covered operations expenditures, 

covered property damage costs, covered 

supplier costs, and covered worker 

protection expenditures, and not more 

than 40% of the forgiven amount may 

be for non-payroll costs. If required, the 

Applicant will provide to the Lender 

and/or SBA documentation verifying 

the number of full-time equivalent 

employees on the Applicant’s payroll as 

well as the dollar amounts of eligible 

expenses for the covered period 

following this loan. 

v. The Applicant has not and will not 

receive another loan under the Paycheck 

Protection Program, section 7(a)(36) of 

the Small Business Act (15 U.S.C. 


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3706 Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations 

87This subsection has been added to codify the 

safe harbor contained in FAQ 46 (posted May 13, 

2020). 

88This subsection replaces the rule originally 

published at 85 FR 20811, subsection III.2.o (April 

15, 2020), as amended by 85 FR 36308 (June 16, 

2020) and has been modified to conform to the 

Economic Aid Act. 

89Covered operations expenditures, covered 

property damage costs, covered supplier costs, and 

covered worker protection expenditures were added 

as eligible expenses in section 304 of the Economic 

Aid Act. Except for loans made pursuant to section 

7(a)(36) of the Small Business Act for which SBA 

has remitted a loan forgiveness payment to the 

lender before December 27, 2020, these eligible 

expenses apply to any loan made before, on, or after 

December 27, 2020, including forgiveness of such 

a loan. 

636(a)(36)) (this does not include 

Paycheck Protection Program second 

draw loans, section 7(a)(37) of the Small 

Business Act (15 U.S.C. 636(a)(37)). 

vi. The Applicant has not and will not 

receive a Shuttered Venue Operator 

grant from SBA. 

vii. 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, does not 

directly or indirectly hold a controlling 

interest in the Applicant, with such 

terms having the meanings provided in 

section 322 of the Economic Aid to 

Hard-Hit Small Businesses, Nonprofits, 

and Venues Act. 

viii. The Applicant is not 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). 

ix. I further certify that the 

information provided in this application 

and the information provided in all 

supporting documents and forms is true 

and accurate in all material respects. I 

understand that knowingly making a 

false statement to obtain a guaranteed 

loan from SBA is punishable under the 

law, including under 18 U.S.C. 1001 

and 3571 by imprisonment of not more 

than five years and/or a fine of up to 

$250,000; under 15 U.S.C. 645 by 

imprisonment of not more than two 

years and/or a fine of not more than 

$5,000; and, if submitted to a federally 

insured institution, under 18 U.S.C. 

1014 by imprisonment of not more than 

thirty years and/or a fine of not more 

than $1,000,000. 

x. I acknowledge that the Lender will 

confirm the eligible loan amount using 

required documents submitted. I 

understand, acknowledge, and agree 

that the Lender can share the tax 

information with SBA’s authorized 

representatives, including authorized 

representatives of the SBA Office of 

Inspector General, for the purpose of 

compliance with SBA Loan Program 

Requirements and all SBA reviews. 

13. Limited Safe Harbor With Respect to 

Certification Concerning Need for PPP 

Loan Request 87

The CARES Act requires each 

applicant applying for a PPP loan to 

certify in good faith ‘‘that the 

uncertainty of current economic 

conditions makes necessary the loan 

request to support the ongoing 

obligations’’ of the applicant. SBA, in 

consultation with the Department of the 

Treasury, issued additional guidance on 

May 13, 2020 concerning how SBA will 

review the required good-faith 

certification. See FAQ 46 (posted May 

13, 2020). This guidance included a safe 

harbor providing that any PPP borrower, 

together with its affiliates, that received 

PPP loans with an original principal 

amount of less than $2 million will be 

deemed to have made the required 

certification concerning the necessity of 

the loan request in good faith. 

14. Can my PPP loan be forgiven in 

whole or in part? 88

Yes. The amount of loan forgiveness 

can be up to the full principal amount 

of the loan and any accrued interest. An 

eligible borrower will not be responsible 

for any loan payment if the borrower 

uses all of the loan proceeds for 

forgivable purposes and employee and 

compensation levels are maintained or, 

if not, an applicable safe harbor or 

exemption applies. The actual amount 

of loan forgiveness will depend, in part, 

on the total amount of payroll costs 

(including employer contributions for 

group health, life, disability, vision and 

dental insurance), payments of interest 

on mortgage obligations incurred before 

February 15, 2020, rent payments on 

leases dated before February 15, 2020, 

utility payments for service that began 

before February 15, 2020, covered 

operations expenditures, covered 

property damage costs, covered supplier 

costs, and covered worker protection 

expenditures over the loan forgiveness 

covered period.89 Payroll costs that are 

qualified wages taken into account in 

determining the Employer Retention 

Credit are not eligible for loan 

forgiveness. The ‘‘loan forgiveness 

covered period’’ is the period beginning 

on the date the lender disburses the PPP 

loan and ending on any date selected by 

the borrower that occurs during the 

period (i) beginning on the date that is 

8 weeks after the date of disbursement 

and (ii) ending on the date that is 24 

weeks after the date of disbursement. 

To receive full loan forgiveness, a 

borrower must use at least 60 percent of 

the PPP loan for payroll costs, and not 

more than 40 percent of the loan 

forgiveness amount may be attributable 

to nonpayroll costs. For example, if a 

borrower uses 59 percent of its PPP loan 

for payroll costs, it will not receive the 

full amount of loan forgiveness it might 

otherwise be eligible to receive. Instead, 

the borrower will receive partial loan 

forgiveness, based on the requirement 

that 60 percent of the forgiveness 

amount must be attributable to payroll 

costs. For example, if a borrower 

receives a $100,000 PPP loan, and 

during the covered period the borrower 

spends $54,000 (or 54 percent) of its 

loan on payroll costs, then because the 

borrower used less than 60 percent of its 

loan on payroll costs, the maximum 

amount of loan forgiveness the borrower 

may receive is $90,000 (with $54,000 in 

payroll costs constituting 60 percent of 

the forgiveness amount and $36,000 in 

nonpayroll costs constituting 40 percent 

of the forgiveness amount). Because the 

Economic Aid Act changed the loan 

forgiveness covered period from either 

an 8- or 24-week period to a covered 

period between 8 and 24 weeks at the 

election of the borrower, SBA is 

eliminating the ‘‘alternative covered 

period’’ as defined in the interim final 

rule published at 85 FR 33004, 33006 

(June 1, 2020), as amended. 

Additionally, an eligible borrower 

that received a loan of $150,000 or less 

shall not, at the time of its application 

for loan forgiveness, be required to 

submit any application or 

documentation in addition to the 

certification and information required 

by paragraph 7A(l)(1)(A) of the Small 

Business Act. Such borrowers must 

retain records relevant to the form that 

prove compliance with the PPP 

requirements—with respect to 

employment records, for the 4-year 

period following submission of the loan 

forgiveness application, and with 

respect to other records, for the 3-year 

period following submission of the loan 

forgiveness application. All other 

borrowers must follow the existing 

requirements for loan forgiveness 

applications and records retention. SBA 

may review and audit PPP loans of 

$150,000 or less and access any records 

the borrower is required to retain. All 

borrowers with loans of any size must 

provide documentation independently 

to a lender to satisfy relevant Federal, 

State, local or other statutory or 

regulatory requirements or in 

connection with an SBA loan review. 

The Economic Aid Act repealed the 

CARES Act provision requiring SBA to 

deduct EIDL Advance Amounts 

received by borrowers from the 

forgiveness payment amounts remitted 


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Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations 3707 

90This subsection was originally published at 85 

FR 20811, subsection III.2.p. (April 15, 2020). 

91This subsection was originally published at 85 

FR 20811, subsection III.3.a. (April 15, 2020) and 

has been modified to conform to additional interim 

final rules or guidance and sections 323 and 343 of 

the Economic Aid Act. 

92Section 314 of the Economic Aid Act contains 

the following information related to Farm Credit 

System Institutions: ‘‘(1) APPLICABLE RULES.— 

Solely with respect to loans under paragraphs (36) 

and (37) of section 7(a) of the Small Business Act 

(15 U.S.C. 636(a)), Farm Credit Administration 

regulations and guidance issued as of July 14, 2020, 

and compliance with such regulations and 

guidance, shall be deemed functionally equivalent 

to requirements referenced in section 3(a)(iii)(II) of 

the interim final rule of the Administration entitled 

‘Business Loan Program Temporary Changes; 

Paycheck Protection Program’ (85 FR 20811 (April 

15, 2020)) or any similar requirement referenced in 

that interim final rule in implementing such 

paragraph (37).’’ 

93This subsection c.iii. was modified to 

implement the rule originally published at 85 FR 

26324, subsection III.2.a. (May 4, 2020). 

94Lenders described in this subsection (e.) should 

follow the special instructions in footnote 1 of the 

1102 Lender Agreement—Non-Bank and NonInsured Depository Institution Lenders (SBA Form 

3507). This subsection (e.) was adapted from the 

rule originally published at 85 FR 26324, subsection 

III.2.b. (May 4, 2020). 

95This subsection adds a new requirement that 

all PPP lenders must register in SAM.gov. See 2 CFR 

25.110(c)(2)(iii). 

96This subsection was originally published at 85 

FR 20811, subsection III.3.b. (April 15, 2020) and 

has been modified to conform to additional rules or 

guidance and the Economic Aid Act. 

by SBA to the lender. The EIDL 

Advance Amount received by the 

borrower will not reduce the amount of 

forgiveness to which the borrower is 

entitled and will not be deducted from 

the forgiveness payment amount that 

SBA remits to the lender. Any EIDL 

Advance Amounts previously deducted 

from a borrower’s forgiveness amount 

will be remitted to the lender, together 

with interest to the remittance date. 

15. Do independent contractors count as 

employees for purposes of PPP loan 

forgiveness? 90

No, independent contractors have the 

ability to apply for a PPP loan on their 

own so they do not count for purposes 

of a borrower’s PPP loan forgiveness. 

16. For loans made prior to December 

27, 2020, what additional 

documentation must a borrower submit 

when the President of the United States, 

Vice President of the United States, the 

head of an Executive department, or a 

Member of Congress, or the spouse of 

any of the preceding, directly or 

indirectly holds a controlling interest in 

the borrower? 

For PPP loans made before December 

27, 2020, if the President of the United 

States, Vice President of the United 

States, 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 borrower, the principal executive 

officer, or individual performing a 

similar function, of the borrower must 

disclose that information to SBA. Such 

disclosure must be made not later than 

January 26, 2021, if the borrower 

submitted an application for forgiveness 

before December 27, 2020, or not later 

than 30 days after submitting an 

application for forgiveness. 

C. What do lenders need to know and 

do? 

1. Who is eligible to make PPP loans? 91

a. All SBA 7(a) lenders are 

automatically approved to make PPP 

loans on a delegated basis. 

b. The Act provides that the authority 

to make PPP loans can be extended to 

additional lenders determined by the 

Administrator and the Secretary to have 

the necessary qualifications to process, 

close, disburse, and service loans made 

with the SBA guarantee. Since SBA is 

authorized to make PPP loans (and 

loans under section 7(a)(37) of the Small 

Business Act) up to $806.45 billion by 

March 31, 2021, the Adminstrator and 

the Secretary have jointly determined 

that authorizing additional lenders is 

necessary to achieve the purpose of 

allowing as many eligible borrowers as 

possible to receive loans by the March 

31, 2021 deadline. 

c. The following types of lenders have 

been determined to meet the criteria and 

are eligible to make PPP loans unless 

they currently are designated in 

Troubled Condition by their primary 

Federal regulator or are subject to a 

formal enforcement action with their 

primary Federal regulator that addresses 

unsafe or unsound lending practices: 

i. Any federally insured depository 

institution or any federally insured 

credit union; 

ii. Any Farm Credit System 

institution 92 (other than the Federal 

Agricultural Mortgage Corporation) as 

defined in 12 U.S.C. 2002(a) that applies 

the requirements under the Bank 

Secrecy Act and its implementing 

regulations (collectively, BSA) as a 

federally regulated financial institution, 

or functionally equivalent requirements 

that are not altered by this rule; and 

iii. Any depository or non-depository 

financing provider that originates, 

maintains, and services business loans 

or other commercial financial 

receivables and participation interests; 

has a formalized compliance program; 

applies the requirements under the BSA 

as a federally regulated financial 

institution, or the BSA requirements of 

an equivalent federally regulated 

financial institution; has been operating 

since at least February 15, 2019, and has 

originated, maintained, or serviced more 

than $50 million in business loans or 

other commercial financial receivables 

during a consecutive 12 month period 

in the past 36 months, or is a service 

provider to any insured depository 

institution that has a contract to support 

such institution’s lending activities in 

accordance with 12 U.S.C. 1867(c) and 

is in good standing with the appropriate 

Federal banking agency.93

d. Qualified institutions described in 

1.c.i. and ii. will be automatically 

qualified under delegated authority by 

the SBA upon transmission of CARES 

Act Section 1102 Lender Agreement 

(SBA Form 3506) unless they currently 

are designated in Troubled Condition by 

their primary Federal regulator or are 

subject to a formal enforcement action 

by their primary Federal regulator that 

addresses unsafe or unsound lending 

practices. 

e. A non-bank lender may be 

approved to make PPP loans if it has 

originated, maintained, or serviced more 

than $10 million in business loans or 

other commercial financial receivables 

during a 12-month period in the past 36 

months, if the non-bank lender is (1) a 

community development financial 

institution (other than a federally 

insured bank or federally insured credit 

union) or (2) a majority minority-, 

women-, or veteran/military-owned 

lender.94

2. Do lenders have to register in 

SAM.gov to make PPP loans? 95

Yes. Given the exigent circumstances 

in which small businesses and lenders 

currently find themselves due to the 

COVID–19 pandemic, PPP lenders will 

have thirty (30) days from the date of 

the first PPP loan disbursement made by 

them after December 27, 2020 to 

complete SAM registration and provide 

SBA with the lender’s unique entity 

identifier. 

3. What do lenders have to do in terms 

of loan underwriting? 96

Each lender shall: 

a. Confirm receipt of borrower 

certifications contained in Paycheck 

Protection Program Borrower 

Application Form (SBA Form 2483) 

issued by the Administration or lender’s 

equivalent form; 

b. Confirm receipt of information 

demonstrating that a borrower was 

either an eligible self-employed 

individual, independent contractor, or 


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3708 Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations 

97See PPP FAQ 1 (April 3, 2020) for further 

information on this step. 

98This paragraph was added to conform to 

section 305 of the Economic Aid Act. This shall be 

effective as if included in the CARES Act and shall 

apply to any loan made before, on, or after 

December 27, 2020, including forgiveness of such 

a loan. 

99This subsection was originally published at 85 

FR 20811, subsection III.3.c. (April 15, 2020) and 

has been modified for readability. SBA also intends 

to issue a consolidated interim final rule governing 

all aspects of loan forgiveness and the loan review 

process. 

100This subsection was originally published at 85 

FR 20811, subsection III.3.d. (April 15, 2020) and 

has been modified to conform to section 340 of the 

Economic Aid Act. 

101This subsection was originally published at 85 

FR 20811, subsection III.4.d (April 15, 2020) and 

modified to reflect that advance purchases are not 

available. 

102This subsection was originally published at 85 

FR 21747, subsection III.3. (April 20, 2020). 

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 by reviewing the payroll 

documentation submitted with the 

borrower’s application; 97 and 

d. Follow applicable BSA 

requirements: 

i. Federally insured depository 

institutions and federally insured credit 

unions should continue to follow their 

existing BSA protocols when making 

PPP loans to either new or existing 

customers who are eligible borrowers 

under the PPP. PPP loans for existing 

customers will not require reverification under applicable BSA 

requirements, unless otherwise 

indicated by the institution’s risk-based 

approach to BSA compliance. 

ii. Entities that are not presently 

subject to the requirements of the BSA, 

should, prior to engaging in PPP lending 

activities, including making PPP loans 

to either new or existing customers who 

are eligible borrowers under the PPP, 

establish an anti-money laundering 

(AML) compliance program equivalent 

to that of a comparable federally 

regulated institution. Depending upon 

the comparable federally regulated 

institution, such a program may include 

a customer identification program (CIP), 

which includes identifying and 

verifying their PPP borrowers’ identities 

(including e.g., date of birth, address, 

and taxpayer identification number), 

and, if that PPP borrower is a company, 

following any applicable beneficial 

ownership information collection 

requirements. Alternatively, if available, 

entities may rely on the CIP of a 

federally insured depository institution 

or federally insured credit union with 

an established CIP as part of its AML 

program. In either instance, entities 

should also understand the nature and 

purpose of their PPP customer 

relationships to develop customer risk 

profiles. Such entities will also 

generally have to identify and report 

certain suspicious activity to the U.S. 

Department of the Treasury’s Financial 

Crimes Enforcement Network (FinCEN). 

If such entities have questions with 

regard to meeting these requirements, 

they should contact the FinCEN 

Regulatory Support Section at FRC@

fincen.gov. In addition, FinCEN has 

created a COVID–19-specific contact 

channel, via a specific drop-down 

category, for entities to communicate to 

FinCEN COVID–19-related concerns 

while adhering to their BSA obligations. 

Entities that wish to communicate such 

COVID–19-related concerns to FinCEN 

should go to www.FinCEN.gov, click on 

‘‘Need Assistance,’’ and select 

‘‘COVID19’’ in the subject drop-down 

list. 

Each lender’s underwriting obligation 

under the PPP is limited to the items 

above and reviewing the ‘‘Paycheck 

Protection Borrower Application Form.’’ 

Borrowers must submit such 

documentation as is necessary to 

establish eligibility such as payroll 

records, payroll tax filings, or Form 

1099–MISC, Schedule C or F, income 

and expenses from a sole 

proprietorship, or bank records. For 

borrowers that do not have any such 

documentation, the borrower must 

provide other supporting 

documentation, such as bank records, 

sufficient to demonstrate the qualifying 

payroll amount. 

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 paragraph 7(a)(36) of 

the Small Business Act (15 U.S.C. 

636(a)(36)); 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 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 

PPP loan, if—(A) the lender acts in good 

faith relating to loan origination or 

forgiveness of the 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 PPP loan.98

4. Can lenders rely on borrower 

documentation for loan forgiveness? 99

Yes. The lender does not need to 

independently verify the borrower’s 

reported information if the borrower 

submits documentation supporting its 

request for loan forgiveness and attests 

that it accurately verified the payments 

for eligible costs. 

5. What fees will lenders be paid? 100

For PPP loans made on or after 

December 27, 2020, SBA will pay 

lenders fees, based on the balance of the 

financing outstanding at the time of 

disbursement of the loan, for processing 

PPP loans in the following amounts: 

i. For loans of not more than $50,000, 

an amount equal to the lesser of fifty 

(50) percent or $2,500; 

ii. Five (5) percent for loans of more 

than $50,000 and not more than 

$350,000; 

iii. Three (3) percent for loans of more 

than $350,000 and less than $2,000,000; 

and 

iv. One (1) percent for loans of at least 

$2,000,000. 

SBA will pay the fee not later than 5 

days after the reported disbursement of 

the PPP loan and, as required by the 

Economic Aid Act, may not require the 

fee to be repaid by the lender unless the 

lender is found guilty of an act of fraud 

in connection with the PPP loan. 

6. Can PPP loans be sold into the 

secondary market? 101

Yes. A PPP loan may be sold on the 

secondary market after the loan is fully 

disbursed. A PPP loan may be sold on 

the secondary market at a premium or 

a discount to par value. 

7. Do the requirements for loan pledges 

under 13 CFR 120.434 apply to PPP 

loans pledged for borrowings from a 

Federal Reserve Bank (FRB) or advances 

by a Federal Home Loan Bank 

(FHLB)? 102

No. Pursuant to SBA regulations at 13 

CFR 120.435(d) and (e), a pledge of 7(a) 

loans to a FRB or FHLB does not require 

SBA’s prior written consent or notice to 

SBA. SBA, in consultation with 

Treasury, has determined that for 

purposes of loans made under the PPP, 

the additional requirements set forth in 

120.434 shall also not apply. This 

would mean, for example, that SBA 

would not have to approve loan 


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103This subsection was originally published at 85 

FR 23450, subsection III.1.a. (April 28, 2020). 104This subsection was originally published at 85 

FR 23450, subsection III.1.b. (April 28, 2020) and 

has been modified to conform to the Economic Aid 

Act. 

105This requirement is satisfied by a lender when 

the lender completes the process of submitting a 

loan through the E-Tran system; no transmission or 

retention of a physical copy of Form 2484 is 

required. 

106This subsection was originally published at 85 

FR 26321, subsection III.1.b. (May 4, 2020) and has 

been modified to conform to the Economic Aid Act 

and for readability. 

107This subsection was added to conform to the 

Economic Aid Act. 

108This subsection was originally published at 85 

FR 20811, subsection III.4.a. (April 15, 2020) and 

modified to conform to the Economic Aid Act. 

109This subsection (d) was revised to conform to 

section 339 of the Economic Aid Act. The revision 

applies to PPP loans made on or after December 27, 

2020, but may apply with respect to a PPP loan 

made before that date upon the mutual agreement 

of the lender and the borrower. 

110This subsection was originally published at 85 

FR 20811, subsection III.3.e. (April 15, 2020). 

111This subsection was originally published at 85 

FR 20811, subsection III.4.a. (April 15, 2020). 

112This subsection was originally published at 85 

FR 20811, subsection III.4.c. (April 15, 2020) and 

modified to conform to section 340 of the Economic 

Aid Act. This revision is effective as if included in 

the CARES Act and applies to PPP loans made 

before, on, or after December 27, 2020, including 

forgiveness of such a loan. 

documents or require a multi-party 

agreement among SBA, the lender, and 

others. 

8. Are lenders required to use a 

promissory note provided by SBA or 

may they use their own? 103

Lenders may use their own 

promissory note or an SBA form of 

promissory note. 

9. Are lenders required to use a separate 

SBA Authorization document to issue 

PPP loans? 104

No. A lender does not need a separate 

SBA Authorization for SBA to guarantee 

a PPP loan. However, lenders must have 

executed SBA Form 2484 (the Lender 

Application Form—Paycheck Protection 

Program Loan Guaranty) 105 to issue PPP 

loans and receive a loan number for 

each originated PPP loan. Lenders may 

include in their promissory notes for 

PPP loans any terms and conditions, 

including relating to amortization and 

disclosure, that are not inconsistent 

with section 1102 of the CARES Act and 

section 7A of the Small Business Act, 

the PPP Interim Final Rules and 

guidance, and SBA Form 2484. See FAQ 

21 (posted April 13, 2020). The decision 

not to require a separate SBA 

Authorization in order to ensure that 

critical PPP loans are disbursed as 

efficiently as practicable. 

10. By when must a lender electronically 

submit an SBA Form 1502 indicating 

that PPP loan funds have been 

disbursed? 106

SBA has made available a specific 

SBA Form 1502 reporting process 

through which PPP lenders report on 

PPP loans and collect the processing fee 

on fully disbursed loans to which they 

are entitled. Lenders must electronically 

upload SBA Form 1502 information 

within 20 calendar days after a PPP loan 

is approved. The lender must report on 

SBA Form 1502 whether it has fully 

disbursed PPP loan proceeds. A lender 

will not receive a processing fee: (1) 

Prior to full disbursement of the PPP 

loan; (2) if the PPP loan is cancelled 

before disbursement; or (3) if the PPP 

loan is cancelled or voluntarily 

terminated and repaid after 

disbursement (including if a borrower 

repays the PPP loan proceeds to 

conform to the borrower’s certification 

regarding the necessity of the PPP loan 

request). If the lender has received a 

processing fee on a loan that was 

cancelled or voluntarily terminated and 

repaid after disbursement (including if a 

borrower repaid the PPP loan proceeds 

to conform to the borrower’s 

certification regarding the necessity of 

the PPP loan request), SBA will not 

require the lender to repay the 

processing fee unless the lender is 

found guilty of an act of fraud in 

connection with the PPP loan. In 

addition to providing ACH credit 

information to direct payment of the 

requested processing fee, lenders will be 

required to confirm that all PPP loans 

for which the lender is requesting a 

processing fee have been fully disbursed 

on the disbursement dates and in the 

loan amounts reported. A lender must 

report through either E-Tran Servicing 

or the SBA Form 1502 report any PPP 

loans that have been cancelled before 

disbursement or that have been 

cancelled or voluntarily terminated and 

repaid after disbursement. 

11. How do lenders report 

disbursements on PPP loans that are 

approved for loan increases due to the 

Economic Aid Act? 107

Lenders must submit the SBA Form 

1502 information within 20 calendar 

days after a PPP loan increase is 

approved following the SBA Form 1502 

reporting process. See subsection C.10. 

for more information. 

D. What do both borrowers and lenders 

need to know and do? 

1. What are the loan terms and 

conditions? 108

Loans will be guaranteed under the 

PPP under the same terms, conditions 

and processes as other 7(a) loans, with 

certain changes including but not 

limited to: 

a. The guarantee percentage is 100 

percent. 

b. No collateral will be required. 

c. No personal guarantees will be 

required. 

d. The interest rate will be 100 basis 

points or one percent, calculated on a 

non-compounding, non-adjustable 

basis.109

e. 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. Do lenders have to apply the ‘‘credit 

elsewhere test’’? 110

No. When evaluating an applicant’s 

eligibility lenders will not be required to 

apply the ‘‘credit elsewhere test’’ (as set 

forth in section 7(a)(1)(A) of the Small 

Business Act (15 U.S.C. 636) and SBA 

regulations at 13 CFR 120.101). 

3. Are there any fee waivers? 111

a. There will be no up-front guarantee 

fee payable to SBA by the borrower; 

b. There will be no lender’s annual 

service fee (‘‘on-going guaranty fee’’) 

payable to SBA; 

c. There will be no subsidy 

recoupment fee; and 

d. There will be no fee payable to SBA 

for any guarantee sold into the 

secondary market. 

4. Who pays the fee to an agent who 

provides assistance in connection with a 

PPP loan? 112

Agent fees may not be paid out of the 

proceeds of a PPP loan. If a borrower 

has knowingly retained an agent, such 

fees will be paid by the borrower. A 

lender is only responsible for paying 

fees to an agent for services for which 

the lender directly contracts with the 

agent. The total amount that an agent 

may collect from the lender for 

assistance in preparing an application 

for a PPP loan (including referral to the 

lender) may not exceed: 

a. One (1) percent for loans of not 

more than $350,000; 

b. 0.50 percent for loans of more than 

$350,000 and less than $2 million; and 

c. 0.25 percent for loans of at least $2 

million. 

The Act authorizes the Administrator 

to establish limits on agent fees. The 

Administrator, in consultation with the 

Secretary, determined that the agent fee 

limits set forth above are reasonable 

based upon the application 


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3710 Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations 

113This subsection was originally published at 85 

FR 26321, subsection III.1.a. (May 4, 2020), as 

amended by 85 FR 26321 (June 19, 2020), and has 

been modified for readability. 

114 If the tenth calendar day is a Saturday, 

Sunday, or legal holiday, the period continues to 

run until the end of the next business day. 

115This subsection was originally published at 85 

FR 29842, subsection III.1.a. (May 19, 2020) and has 

been revised to conform to sections 312 and 344 of 

the Economic Aid Act. 

116A partner in a partnership may not submit a 

separate PPP loan application as a self-employed 

individual. Instead, the self-employment income of 

general active partners may be reported as a payroll 

cost, up to $100,000 on an annualized basis, as 

prorated for the period during which the payments 

are made or the obligation to make the payments 

is incurred, on a PPP loan application filed by or 

on behalf of the partnership. 

117This subsection was originally published at 85 

FR 29842, subsection III.1.b. (May 19, 2020) and has 

been revised to conform to sections 312 and 336 of 

the Economic Aid Act. 

118This subsection was added to conform to 

section 312 of the Economic Aid Act. See also 

recalculation available under subsection B.4.d. 

above for farmers and ranchers. 

119This subsection was originally published at 85 

FR 29842, subsection III.2.a. (May 19, 2020) and 

revised to conform to section 312 of the Economic 

Aid Act. 

120This subsection was originally published at 85 

FR 27287, section III.1. (May 8, 2020). 

requirements and the fees that lenders 

receive for making PPP loans. 

5. Can a borrower take multiple draws 

from a PPP loan and thereby delay the 

start of the covered period? 113

No. The lender must make a one-time, 

full disbursement of the PPP loan 

within ten calendar days of loan 

approval; for the purposes of this rule, 

a loan is considered approved when the 

loan is assigned a loan number by 

SBA.114

Notwithstanding this limitation, 

lenders are not responsible for delays in 

disbursement attributable to a 

borrower’s failure to timely provide 

required loan documentation, including 

a signed promissory note. Loans for 

which funds have not been disbursed 

because a borrower has not submitted 

required loan documentation within 20 

calendar days of loan approval shall be 

cancelled by the lender. When 

disbursing loans, lenders must send any 

amount of loan proceeds designated for 

the refinance of an EIDL loan directly to 

SBA and not to the borrower. 

6. If a partnership received a PPP loan 

that did not include any compensation 

for its partners, can the loan amount be 

increased to include partner 

compensation? 115

Yes. If a partnership received a PPP 

loan that only included amounts 

necessary for payroll costs of the 

partnership’s employees and other 

eligible operating expenses, but did not 

include any amount for partner 

compensation,116 the lender may 

electronically submit a request through 

SBA’s E-Tran Servicing site to increase 

the PPP loan amount to include 

appropriate partner compensation, even 

if the loan has been fully disbursed and 

even if the lender’s first SBA Form 1502 

report to SBA on the PPP loan has 

already been submitted. In no event can 

the increased loan amount exceed the 

maximum loan amount allowed under 

the PPP Program, which is $10 million 

for an individual borrower or $20 

million for a corporate group. 

Additionally, the borrower must 

provide the lender with required 

documentation to support the 

calculation of the increase. Any request 

for an increase must be submitted 

electronically in E-Tran on or before 

March 31, 2021, and is subject to the 

availability of funds. 

As described in subsection B.1.c., 

partnerships, rather than individual 

partners, are eligible for a PPP loan. As 

described in subsection B.4.e., selfemployment income of general active 

partners could be reported as a payroll 

cost, up to $100,000 on an annualized 

basis, as prorated for the period during 

which the payments are made or the 

obligation to make the payments is 

incurred, on a PPP loan application 

filed by or on behalf of the partnership. 

For guidance describing how to 

calculate partnership PPP loan amounts 

and defining the self-employment 

income of partners, see How to 

Calculate Maximum Loan Amounts, 

Question 4 at https://www.sba.gov/sites/ 

default/files/2020-04/How-to-CalculateLoan-Amounts.pdf (April 20, 2020). 

7. If a seasonal employer received a PPP 

loan before December 27, 2020, can the 

loan amount be increased based on a 

revised calculation of the maximum 

loan amount? 117

Yes. If a seasonal employer received 

a PPP loan before December 27, 2020, 

and such employer would be eligible for 

a higher maximum loan amount under 

section 336 of the Economic Aid Act, as 

described in subsection B.4.c., the 

lender may electronically submit a 

request through SBA’s E-Tran Servicing 

site to increase the PPP loan amount, 

even if the loan has been fully disbursed 

and even if the lender’s first SBA Form 

1502 report to SBA on the PPP loan has 

already been submitted. In no event can 

the increased loan amount exceed the 

maximum PPP loan amount ($10 

million for an individual borrower or 

$20 million for a corporate group). 

Additionally, the borrower must 

provide the lender with required 

documentation to support the 

calculation of the increase. Any request 

for an increase must be submitted 

electronically in E-Tran on or before 

March 31, 2021, and is subject to the 

availability of funds. 

8. Which other PPP borrowers can 

reapply or request an increase in their 

PPP loan amount? 118

The following borrowers can reapply 

or request an increase in their PPP loan 

amount: 

a. If a borrower returned all of a PPP 

loan, the borrower may reapply for a 

PPP loan in an amount the borrower is 

eligible for under current PPP rules. 

b. If a borrower returned part of a PPP 

loan, the borrower may reapply for an 

amount equal to the difference between 

the amount retained and the amount 

previously approved. 

c. If a borrower did not accept the full 

amount of a PPP loan for which it was 

approved, the borrower may request an 

increase in the amount of the PPP loan 

up to the amount previously approved. 

Any request for an increase must be 

submitted electronically in E-Tran on or 

before March 31, 2021, and is subject to 

the availability of funds. SBA will issue 

additional guidance on the process to 

reapply or request a loan increase under 

subsections D.6, D.7, and D.8. 

9. If a borrower’s PPP loan has already 

been fully disbursed, can the lender 

make an additional disbursement for 

the increased loan proceeds? 119

Yes. Notwithstanding the requirement 

set forth in paragraph 1.a. of the interim 

final rule on disbursements posted on 

April 28, 2020, i.e., that lenders make a 

one-time, full disbursement of the PPP 

loan within ten calendar days of loan 

approval, if a PPP loan is increased 

under subsections D.6., D.7., or D.8., the 

lender may make a single additional 

disbursement of the increased loan 

proceeds. 

10. Are recipients of PPP loans entitled 

to exemptions on the grounds provided 

in Federal nondiscrimination laws for 

sex-specific admissions practices, sexspecific domestic violence shelters, 

coreligionist housing, or Indian tribal 

preferences in connection with adoption 

or foster care practices? 120

Yes. With respect to any loan or loan 

forgiveness under the PPP, the 

nondiscrimination provisions in the 

applicable SBA regulations incorporate 

the limitations and exemptions 

provided in corresponding Federal 

statutory or regulatory 


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Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations 3711 

nondiscrimination provisions for sexspecific admissions practices at 

preschools, non-vocational elementary 

or secondary schools, and private 

undergraduate higher education 

institutions under Title IX of the 

Education Amendments of 1972 (20 

U.S.C. 1681 et seq.), for sex-specific 

emergency shelters and coreligionist 

housing under the Fair Housing Act of 

1968 (42 U.S.C. 3601 et seq.), and for 

adoption or foster care practices giving 

child placement preferences to Indian 

tribes under the Indian Child Welfare 

Act of 1978 (25 U.S.C. 1901 et seq.). 

In addition, for purposes of the PPP, 

SBA regulations do not bar a religious 

nonprofit entity from making decisions 

with respect to the membership or the 

employment of individuals of a 

particular religion to perform work 

connected with the carrying on by such 

nonprofit of its activities. 

E. Additional Information 

All loans guaranteed by the SBA 

pursuant to the CARES Act and the 

Economic Aid Act will be made 

consistent with constitutional, statutory, 

and regulatory protections for religious 

liberty, including the First Amendment 

to the Constitution, the Religious 

Freedom Restoration Act, 42 U.S.C. 

2000bb–1 and bb–3, and SBA regulation 

at 13 CFR 113.3–1h, which provides 

that nothing in SBA nondiscrimination 

regulations shall apply to a religious 

corporation, association, educational 

institution or society with respect to the 

membership or the employment of 

individuals of a particular religion to 

perform work connected with the 

carrying on by such corporation, 

association, educational institution or 

society of its religious activities. 

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 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) has 

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 effect but does have 

some retroactive effect consistent with 

specific applicability provisions of the 

Economic Aid Act (such provisions are 

identified in the footnotes). 

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 

requires revisions to existing 

recordkeeping or reporting requirements 

of the Paycheck Protection Program 

(PPP) information collection (OMB 

Control Number 3245–0407) as a result 

of amendments made to the PPP by the 

Economic Aid Act and implemented in 

this interim final rule. The revisions 

will affect the PPP Borrower 

Application Form (SBA Form 2483), the 

PPP Lender Application Form (SBA 

Form 2484), the Lender Application 

Form for Federally Insured Depository 

Institutions, Federally Insured Credit 

Unions, and Farm Credit System 

Institutions (SBA Form 3506), and the 

Lender Application Form for Non-Bank 

and Non-Insured Depository Institution 

Lenders (SBA Form 3507). 

SBA Form 2483 has been revised to 

add housing cooperatives, section 

501(c)(6) organizations, destination 

marketing organizations, and certain 

news organizations to the categories of 

eligible entities; to collect the NAICS 

code of the applicant; to add additional 

eligible use of proceeds; and to add or 

revise the certifications to incorporate 

the Economic Aid Act amendments. 

Changes were made to SBA Form 2484 

to conform to the changes made to SBA 

Form 2483. SBA Forms 3506 and 3507 

were revised to extend the term through 

March 31, 2021; restate the way interest 

rate is calculated; and make clarifying 

changes for consistency with program 

requirements. 

SBA is developing a process to collect 

the information necessary for eligible 

borrowers to reapply or request an 

increase in their PPP loan amount as 

described in this interim final rule. 

SBA has requested emergency 

approval of the revisions to this PPP 

information collection to enable the 

Agency to resume the reauthorized PPP 

as quickly as possible. Without such 

emergency approval, the authority for 


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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 


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