The Small Business Administration (SBA) and Treasury Department issued additional PPP guidance on the Paycheck Protection Program (PPP) Second Draw Loans as well as revised guidelines for First Draw PPP Loans. The SBA and Treasury are still working to operationalize the program and it is expected to launch shortly. The COVID-19 Emergency Relief Package, signed into law on December 27, provided $284 billion to restart the successful program and provide for Second Draw Loans for the hardest hit businesses.
If you are interested in applying for a First or Second Draw PPP loan, we recommend that you reach out to your preferred lender as soon as possible to confirm their participation and prepare necessary documentation.
- Additional information about PPP can be found at: https://home.treasury.gov/policy-issues/cares/assistance-for-small-businesses
Who can apply? Eligible borrowers are businesses with 300 employees or fewer per property that experienced at least a 25% revenue decline in 2020 relative to 2019. The business must have been in operation on February 15, 2020. The eligible borrower must have received a First Draw PPP Loan, and used, or will use, the full amount of the First Draw PPP Loan on or before the expected date of which the Second Draw PPP Loan is disbursed to the borrower.
Each location is permitted to apply for a separate PPP Loan provided it uses its unique Employer Identification Number (EIN).
How can I apply? Borrowers will submit the Paycheck Protection Program Borrower Second Draw application form, or lender’s equivalent form, to their lender along with the required certifications and documentation. The SBA application is expected to be released soon.
When can I apply? A date has not been announced for when the loan portal will re-open. The last day to apply and receive a PPP Loan is March 31, 2021. However, like the First Draw PPP Loans, which will still be made available to businesses that did not receive one last year, demand is expected to be high so the funding may run out earlier. To ensure access for minority, underserved, veteran, and women-owned businesses, the SBA will only accept applications from community financial institutions for at least the first two days when the loan portal re-opens.
What is the maximum loan amount? As a result of our lobbying efforts, the maximum loan amount for hotels (businesses with NAICS code 72) is increased to 3.5x payroll, up to $2 million, versus 2.5x payroll for other businesses.
The relevant time period for calculating a borrower’s payroll costs for a Second Draw PPP Loan is either the twelve-month period prior to when the loan is made or calendar year 2019. Using the 2019 period greatly reduces the application documentation requirements by using your previously provided information.
Businesses that are part of a single corporate entity cannot receive more than $4 million of Second Draw PPP Loans in the aggregate.
How is revenue decline calculated? A business that was in operation in all four quarters of 2019 is deemed to have experienced the revenue decline if it experienced a reduction in annual gross receipts of 25% or greater in 2020 compared to 2019 and borrower submits copies of its annual tax forms substantiating the revenue decline. Businesses that were not in operation the entirety of 2019 can prove a revenue decline based on a similar quarter in 2019. Businesses not in operation in 2019, but in operation on February 15, 2020, that had gross receipts during the second, third, or fourth quarter of 2020 that demonstrate at least a 25% revenue reduction from the gross receipts of the first quarter of 2020 are eligible as well.
Gross receipts include all revenue in whatever form received or accrued (in accordance with the entity’s accounting method) from whatever source, including from the sales of products or services, interest, dividends, rents, royalties, fees, or commissions, reduced by returns and allowances. The amount of any forgiven First Draw PPP Loan does not count towards the borrower’s gross receipts.
Are Second Draw PPP Loans eligible for loan forgiveness? Second Draw PPP Loans are eligible for loan forgiveness on the same terms and conditions as First Draw PPP Loans. To receive full forgiveness, a borrower must use at least 60 percent of the loan proceeds for payroll costs and not more than 40 percent on non-payroll costs. Eligible forgivable expenses for First Draw and Second Draw Loans have been expanded to include covered operations expenditures, property damage due to public disturbances that occurred in 2020 not covered by insurance, covered supplier costs, and covered worker protection expenditures in addition to covered payroll costs, covered mortgage interest payments, rent, and certain utility payments.