The newly revived Paycheck Protection Program includes $137 billion for small businesses to receive a second PPP loan if they suffered substantial revenue losses due to the coronavirus pandemic.
While many aspects of the new program are similar to first-draw PPP loans, there are a few notable differences, leaving business owners with plenty of questions. The responses below address many frequently asked questions related to the PPP second-draw loan program.
Not necessarily. Receiving a first PPP loan is just one condition for second-draw loans. Businesses also need to meet the following requirements:
Additionally, lobbying firms, think tanks, and businesses that engage in political activities are not eligible for second-draw PPP loans.
Businesses can submit first- or second-draw loan applications through any participating PPP lender. The last day to apply for a PPP loan is May 31, 2021.
Business owners need to fill out a separate application (SBA Form 2483-SD) for their second-draw loan, but you may not need to submit payroll documentation if you’re applying through the same lender as your initial PPP loan and use calendar year 2019 for both loans.
Borrowers still need to show revenue decline—via tax returns, bank statements, or other documents—to qualify for a second-draw loan. If you’re borrowing $150,000 or less, you can provide proof at any time prior to receiving loan forgiveness.
To receive a second PPP loan, borrowers need to show they lost at least 25% in either quarterly or annual gross receipts from 2019 to 2020. Documentation that can support this includes, but is not limited to, quarterly financial statements, bank statements, sales tax forms, or other relevant tax forms.
You may also need to prove payroll costs if you use a different lender or payroll time period. Documentation to show payroll costs could include:
Borrowers receiving $150,000 or less for their second-draw loan do not need to show revenue loss on their application, but must do so when applying for loan forgiveness.
The amount of your second loan depends on your payroll costs. Most eligible businesses can receive up to 2.5x their average monthly payroll costs for calendar year 2020, 2019, or the 12 months prior to the loan. There is one notable change to this formula: Businesses in the accommodation and food service industry can now receive up to 3.5x payroll costs.
The maximum loan amount is capped at $2 million for second PPP loans, compared to $10 million for first PPP loans.
Second PPP loans are only available to businesses that have spent the full amount of their initial loan on eligible expenses, or will do so by the time their second-draw loan is disbursed.
Businesses that are temporarily closed can still receive a second-draw loan, provided they meet the other requirements. Businesses that are permanently closed are not eligible for additional PPP funding.
Loan forgiveness requirements for second-draw PPP loans are generally the same as those for first-draw loans. The funds need to be spent on covered costs within 24 weeks.
Covered costs include payroll and operating expenses, including paid sick leave, health insurance and retirement benefits, and supplier costs. Repairs related to property damage incurred during protests that are not covered by insurance and the cost of protective equipment and other health modifications are also allowable uses of second-draw funds.
At least 60% of your total second-draw loan must be used on payroll costs to receive full forgiveness. The remaining funds can be used on other allowable expenses.
Kelsey Sheehy is a contributing writer at Fundera and a personal finance writer for NerdWallet. Kelsey specializes helping businesses understand the intricacies of the Paycheck Protection Program. She has covered all aspects of personal finances over the past decade and has been featured as a consumer finance expert on the “Today” show, CNBC, NBC News, and “ABC World News Tonight.”