The Small Business Administration (SBA) has released an application on January 8, 2021 and clarify how borrowers can qualify and apply for the second round of Paycheck Protection Program (PPP) loans.

First-time and second-draw PPP borrowers are eligible for second round of PPP loans if they meet the eligibility requirements. The second round of loans will be issued under 5-year maturity date, 1% interest rate, full loan forgiveness potential and good faith certification requirement. Second round of PPP loan terms are in line with initial round of PPP loans.

Application deadline for second draw PPP loans is March 31, 2021.

Second-draw PPP borrowers must use the full amount of the initial PPP loan for authorized purposes on or before the expected date of disbursement of the second draw loan in addition to meeting the new eligibility requirements for all applicants (generally, 25% revenue reduction and 300 or fewer employees).

Any borrower that was deemed ineligible for a first draw loan cannot apply for a second draw PPP loan. The methodologies for calculating eligibility requirements for a second draw PPP loan are mentioned beow:

  • Revenue reduction of 25% or greater in 2020 – This should be determined by comparing the borrower’s quarterly gross receipts for one quarter in 2020 to the gross receipts in the corresponding quarter of 2019. Alternately, borrowers that were in operation all four quarters of 2019 may choose either an annual or quarterly basis for this comparison.
  • 300 or fewer employees – The Economic Aid Act applies the same affiliation rules and waivers as the CARES Act when calculating this eligibility requirement. Generally, a borrower must include all affiliates in the total headcount number. Businesses with a NAICS code beginning with 72 are eligible if they have 300 or few employees per physical location.

Second Draw PPP Loan Size

The maximum loan size of second draw loans is determined by payroll costs.  Under the Economic Aid Act, loan amounts are capped at the lesser of two and a half months (three and a half months for 72 NAICS code borrowers) of average monthly payroll costs or $2 million.

Borrowers can determine the expenses based on calendar year 2019 or calendar year 2020. Borrowers who are not self-employed may alternately choose the 12-month period prior to the date the loan is issued.  Most borrowers will use 2019 as documentation supporting those payroll costs was provided in the initial round of PPP loan application process and would not be required to submit again.

Talk to your Lender

You should confirm with your lender that they are participating, or identify an alternate lender.

Put together the documentation to support your assertion regarding revenue reduction. PPP Borrowers with loan sizes under $150,000 will not be required to submit documentation with the initial application, but will be required to do so in the forgiveness process.

If you have any questions regarding your business’s eligibility for a second draw PPP loan, please don’t hesitate to contact us.