Second Draw Paycheck Protection (PPP) Loans.

Find out if your small business qualifies and how to apply in time.

As small and local businesses continue to suffer due to COVID-19 pandemic restrictions, funds are being made continually available to business owners struggling to stay afloat. The Economic Aid to Hard-Hit Small Business, Nonprofits and Venues Act became law on December 27, 2020, and with it $284 billion dollars of additional funding was added to the Paycheck Protection Program (the "PPP").

The second round of the PPP loans has opened as of January 19th, 2020. Unlike the first round of PPP loans, the second draw of loans is intended for smaller and harder-hit businesses. Additionally, the second draw allows business owners that have already received a PPP loan in the first round to apply and receive a second loan.

So...Does My Business Qualify for a Second Round PPP Loan?

Because the second round of PPP loans is taking a harder, more narrow focus on small business, there are a few qualifications that businesses must meet in order to apply and be considered for a loan. Small business owners that apply must have 300 or fewer employees, and agreed to have already used or that they will use the full amount of their PPP1 loan on eligible expenses on or before PPP2 loans are disbursed (in the event that the business received a PPP1 loan). Additionally, small businesses must have experienced a revenue reduction in at least one of a 2020 calendar quarter of at least 25% relative to the same calendar quarter in 2019.

How Do I Calculate My Revenue Reduction?

You can calculate revenue reduction by comparing quarterly gross receipts in the 2020 quarter against gross receipts for the corresponding quarter in 2019.

• Gross receipts generally consist of gross income plus cost of goods sold, but excludes any PPP loan amounts that are forgiven.
• The business owner should include the gross receipts of any affiliates, including any affiliates acquired during 2020 (in which case gross receipts should include the entire measurement period; not just the period after which affiliation arose).

How Much Can I Expect to Get if I Receive a PPP2 Loan?

In most cases, loan amounts are capped at either 2.5x monthly payroll costs or $2 million. While PPP2 loans have some mandatory qualifications, both PPP1 and PPP2 loans have greater flexibility in some notable areas:

• In calculating the maximum loan amount, the business owner may calculate average monthly payroll costs based on calendar year 2019 or 2020.
• Eligible expenses have been expanded to include, among other things, worker protection expenditures, supplier costs, cloud computing and other software services that facilitate business operations.
• The definition of payroll costs that are eligible for forgiveness has been expanded to include payments for the provision of employee benefits consisting of group health care or group life, disability, vision or dental insurance.
• The period for expending the loan proceeds on eligible expenses for forgiveness can be between 8 and 24 weeks (as selected by the business owner).

How Do I Apply for a PPP Loan?

Applications to apply for the Paycheck Protection Loan Forgiveness Program can be found on the U.S. Small Business Administration website (https://www.sba.gov/). Applications for both PPP1 and PPP2 close March 31, 2021.