Additional Information - PPP Second Draw

Paycheck Protection Program Second Draw Loans

Creates a second loan from the Paycheck Protection Program, called a “PPP second draw” loan for smaller and harder-hit businesses, with a maximum amount of $2 million.

The information below is directly from the “Act” and may be revised by SBA during program implementation and distribution of guidance to lenders. The SBA Guidance must conform to the intentions of the “Act”.

 

Eligibility 

To receive a PPP loan under this section, your business must:


  • Employ not more than 300 employees;
  • Have used the full amount of your first PPP loan
  • Demonstrate at least a 25 percent reduction in gross receipts in the first, second, or third quarter of 2020 relative to the same 2019 quarter. Applicable timelines are provided for businesses that were not in operation in Q1, Q2, and Q3, and Q4 of 2019. Applications submitted on or after January 1, 2021 are eligible to use the gross receipts from the fourth quarter of 2020.
  • Eligible entities must be businesses, certain non-profit organizations, housing cooperatives, veterans’ organizations, tribal businesses, self-employed individuals, sole proprietors, independent contractors, and small agricultural co-operatives.


Loan terms

In general, you may receive a loan amount of up to 2.5x your average monthly payroll costs in the one year prior to the loan or the calendar year. No loan can be greater than $2 million.


  • Seasonal employers may calculate their maximum loan amount based on a 12-week period beginning February 15, 2019 through February 15, 2020
  • New entities may receive loans of up to 2.5x of average monthly payroll costs
  • Entities in industries such as Accommodation and Food Services may receive loans of up to 3.5x average monthly payroll costs
  • Businesses with multiple locations that are eligible entities under the initial PPP requirements may employ not more than 300 employees per physical location
  • Waivers of affiliation rules that applied during initial PPP loans apply to a second loan
  • An eligible entity may only receive one PPP second draw loan
  • Fees are waived for both borrowers and lenders to encourage participation
  • For loans less than $150,000, the business may submit a certification attesting that they meet the revenue loss requirements on or before the date the business submits their loan forgiveness application and non-profit and veteran’s organizations may utilize gross receipts to calculate their revenue loss standard

Additional Eligible Expenses

The Act makes the following expenses allowable and forgivable uses for PPP funds:


  • Covered operations: Payment for any software, cloud computing, and other human resources and accounting needs.
  • Covered property damage: Costs related to property damage due to public disturbances that occurred during 2020 that are not covered by insurance.
  • Covered supplier: Expenditures to a supplier pursuant to a contract, purchase order, or order for goods in effect prior to taking out the loan that are essential to the recipient’s operations at the time at which the expenditure was made. Supplier costs of perishable goods can be made before or during the life of the loan.
  • Covered worker protection expenditure: Personal protective equipment and adaptive investments to help a loan recipient comply with federal health and safety guidelines or any equivalent State and local guidance related to COVID-19 during the period between March 1, 2020, and the end of the national emergency


Repeal of EIDL Advance Deduction

  • Repeals section 1110(e)(6) of the CARES Act, which requires PPP borrowers to deduct the amount of their EIDL advance from their PPP forgiveness amount.
  • Establishes the Sense of Congress that EIDL Advance borrowers should be made whole without regard to whether those borrowers are eligible for PPP forgiveness.
  • Requires the Administrator to issue rules that ensure borrowers are made whole if they received forgiveness and their EIDL grant amount was deducted from the forgiveness amount paid.