Second draw & reactivation of PPP loans: Applications now open, 1.11.21

The Small Business Administration (SBA) on Jan. 6, 2021, released guidance related to the Paycheck Protection Program (PPP) and the second draw of PPP loans as outlined in the recently passed Economic Aid Act.

How can you apply?

What has changed from the first round of PPP?

The eligibility and requirements for new and second-draw PPP loans are similar to the original program, except:

1. Second-draw PPP loans are available to businesses that can demonstrate a 25% loss in revenue compared to the previous year. This may be calculated by comparing the borrower’s quarterly gross receipts for one calendar quarter in 2020 with the corresponding quarter in 2019.
   • To be eligible for a second-draw loan, the borrower must have used, or will use, the full amount of the first loan on or before the expected disbursal date of the second loan.
   • Eligible businesses can have a maximum of 300 employees. Like the original PPP loans, the second-draw program retains the unique rules around businesses with a NAICS code beginning in 72, including hotels and restaurants. This means that the 300-employee rule is evaluated on a per-location basis for businesses with more than one physical location. Each location can apply for a separate PPP loan using its unique Employer Identification Number.
2. The maximum loan amount and the payroll amount calculation used to determine the size of the loan have changed.
   • Hotels and restaurants are now eligible to receive up to 3.5x monthly payroll costs, up to $2 million as the maximum of the loan.
   • Businesses that are part of a single corporate group are limited to a maximum of $4 million in aggregate second-draw PPP loans. This applies to hotels and restaurants that are eligible for the affiliation waiver and per-location employee test.

How will the loan amount be calculated?

According to the National Restaurant Association, there are three options to calculate the average monthly payroll figure that is multiplied by 3.5:

1) Use the average monthly payroll from 2019, or;
2) Use the average monthly payroll from 2020; or
3) Use the average monthly payroll for the 12-month period before the PPP second-draw loan origination date.

Minority, underserved, veteran and women-owned employers?

SBA has specific guidelines for minority, underserved, veteran and women-owned employers. For the first two days, at minimum, the SBA is accepting PPP loan applications only from community financial institutions when the PPP loan portal reopens. The National Restaurant Association said there are targeted “set aside” funds for new and smaller borrowers, for borrowers in low- and moderate-income communities and for community and smaller lenders, which include:

• $35 billion for new first draw PPP borrowers
• $15 billion and $25 billion for first-draw and second-draw PPP loans, respectively, for borrowers with a maximum of 10 employees or for loans less than $250,000 to borrowers in low-or moderate-income neighborhoods

Read the information special to this group here. 

What should you do next?

Start the application process today, at the links below.

NEW Application for Second Draw PPP

• Form 2483-SD – Second Draw Borrower Application (Released 1/8/21)

Updated Application for First Draw PPP

Form 2483 – First Draw Borrower Application (Updated 1/8/21)