SBA Approves a Second Round of PPP Loans
By Jarina D. Duffy
As of January 13, 2021, the Small Business Administration (“SBA”) reopened the Paycheck Protection Program (“PPP”) to allow for applications for a second draw. Eligible borrowers that received a PPP loan back at the beginning of the availability of the program are now potentially eligible for a second draw.
Helpfully, SBA has expanded the definition of what qualifies as a “cost” that may be covered with PPP funds. Specifically, PPP funds may now be used for payroll costs (including benefits), mortgage interest, rent, utilities, worker-protection costs related to COVID-19, uninsured property damage costs caused by vandalism during 2020, and certain supplier costs and expenses for operations. For those in the Accommodation and Food Services Sector, the second draw can be as high as three and a half times average monthly 2019 or 2020 payroll costs (up to $2 million). For everyone else, the limit is as high as two and a half times the average monthly 2019 or 2020 payroll costs (up to $2 million).
The qualifications for the second draw include that the applicant: (1) previously received a PPP loan and will or has spent the funds properly; (2) has fewer than 300 employees; and (3) can show a 25% reduction in revenue between comparable quarters in 2019 and 2020. In order to show the reduction in revenue, applicants have the option of providing quarterly financial statements, quarterly or monthly bank statements, or annual IRS income tax filings.
Importantly, an applicant need not have applied for or received forgiveness for its first PPP loan in order to apply for a second draw.
Applications for a second draw will be accepted until March 31, 2021. The application form can be found here.
In order to qualify for forgiveness for the second draw, applicants must have met the following criteria: (1) employee and compensation levels were maintained under the rules of the first draw; (2) loan proceeds were spent on eligible expenses; and (3) at least 60% of the proceeds were spent on payroll costs.
If you would like help with your PPP loan or forgiveness application, please contact me at email@example.com or 610-205-6061.