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.
Do I automatically qualify for a second PPP loan if I received a first?
Not necessarily. Receiving a first PPP loan is just one condition for second-draw loans. Businesses also need to meet the following requirements:
- Employ no more than 300 people. (First-draw loans are available to businesses with fewer than 500 employees.)
- Able to show a loss of at least 25% in annual gross receipts or for any quarter in 2020 compared with the previous year.
- Have used or will use the entirety of their first PPP loan.
Additionally, lobbying firms, think tanks, and businesses that engage in political activities are not eligible for second-draw PPP loans.
When is the deadline to apply for a PPP loan?
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.
Can I reuse the application from my first PPP loan?
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.
What documentation do I need to provide?
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:
- IRS forms: Form 1040 (Schedule C or F), Form 941, Form 1065 (Schedule K-1), Form 1099-MISC, Form 1120, Form 990 or 990-EZ, Form W-2, Form W-3, Form 943, or Form 944
- Other forms: state unemployment quarterly unemployment tax forms and annual tax reports from your payroll processor; records from your retirement plan administrator, health insurance company, or third-party benefits administrator
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.
Will I receive the same amount as my first loan?
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.
I haven’t spent my first loan; can I get a second PPP loan?
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.
My business is closed due to local coronavirus restrictions. Can I still get a second-draw loan?
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.
Are the forgiveness requirements for second-draw PPP loans the same as first-draw loans?
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.”