Round 2 – Paycheck Protection Program

The second round of PPP is in effecti, and certain eligible borrowers that received funding in the first round can apply for this second round. The second round PPP funds can be used to fund payroll costs, benefits, mortgage interest, rent, utilities, uninsured property damage costs, certain supplier costs and expenses of operation, and worker protection costs. Main components of the program are:

Full Forgiveness Terms

To qualify for full loan forgiveness for the Second Draw PPP, during the period of 8 to 24 weeks following the disbursement of the loan:

  • Employees and their compensation levels are maintained in the same manner as required for the First Draw PPP loan.
  • The loan proceeds go to payroll costs and other eligible expenses.
  • At least 60% of the loan proceeds are spent on payroll costs.

Adherence to these requirements should lead to full forgiveness of the loan. Here is what the SBA says about application for forgiveness: “A borrower can apply for forgiveness once all loan proceeds for which the borrower is requesting forgiveness have been used. Borrowers can apply for forgiveness any time up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 months after the last day of the covered period, then PPP loan payments are no longer deferred, and borrowers will begin making loan payments to their PPP lender.”

Targeted Eligibility

To be eligible for the Second Draw PPP Loan, the borrower:

  • If the borrower received the First Draw PPP Loan, they must have used the full amount only for approved uses.
  • They can have no more than 300 employees.
  • They must be able to demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020.

Potential borrowers should get their documentation together and consult with their financial advisors if necessary.

Maximum Loan Amount

For most borrowers, the Second Draw PPP Loan maximum amount is 2.5 times the average monthly 2019 or 2020 payroll costs, up to $2 million. If your business is in the Accommodation or Food Services sectors, the maximum loan amount for the Second Draw is 3.5 times the average monthly payroll costs up to a maximum of $2 million.

How and When to Apply

You have until March 31, 2021 to apply for the Second Draw PPP Loan. You apply through any existing SBA 7(a) lender or participating Farm Credit System. There will be no difference in terms between lenders. A list of participating lenders is here.

Access

The SBA works with their approved lenders to try to offer available assistance to every business that is qualified, especially in underserved and disadvantaged communities. The SBA has set aside at least $25 billion for borrowers with 10 or fewer employees or for loans of $250,000 or less for eligible borrowers in low- or moderate-income areas. To assist in this access, the SBA has initially set up to accept applications from community financial institutions starting January 13, 2021.

i Paycheck Protection Program 2nd Draw Loans, IRS document

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