The Small Business Association (SBA), in consultation with the U.S. Treasury Department, reopened the Paycheck Protection Program (PPP) under the COVID relief bill for First Draw PPP Loans the week of January 11, 2021. SBA began accepting applications for Second Draw PPP Loans starting today, January 13, 2021. Under this new bill, some businesses will now be eligible for a second loan. Here’s a quick guide on all you need to know.

Loan Details

The terms of the original PPP loan remain the same, whether this will be your first or second time applying for the PPP loan. Most of the funds from the loan (60%) must be used toward payroll. The remaining amount (40%) should be spent on other eligible expenses. Like the first loan, this second round of PPP loans can be 100% forgiven once you follow the proper guidelines.

Second Draw PPP Loans can be used to help fund payroll costs, including benefits. Funds can also be used to pay for mortgage interest, rent, utilities, worker protection costs related to COVID-19, uninsured property damage costs caused by looting or vandalism during 2020, and certain supplier costs and expenses for operations.

Unforgiven loans accrue a 1% interest rate and span a five-year term. Loan payments are deferred for 10 months after the covered period ends or when you receive a forgiveness verdict, whichever comes first.

At least $25 billion is being set aside for Second Draw PPP Loans to eligible borrowers with a maximum of 10 employees or for loans of $250,000 or less to eligible borrowers in low or moderate income neighborhoods.

Who is Eligible?

If your business suffered a loss in revenue in 2020, you may be eligible for a PPP loan. A small business with no more than 300 employees that have at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020 may apply.

***The loss of gross sales has to be 25% or more compared to the same quarter last year. Example: 2nd quarter of 2020 compared to 2nd quarter of 2019.

For businesses that are seeking to apply for a second PPP loan, in addition to the above stipulations, you must have already used the full amount for qualifying expenses.

For most borrowers, the maximum loan amount of a Second Draw PPP Loan is 2.5x average monthly 2019 or 2020 payroll costs up to $2 million. For borrowers in the Accommodation and Food Services sector (use NAICS 72 to confirm), the maximum loan amount for a Second Draw PPP Loan is 3.5x average monthly 2019 or 2020 payroll costs up to $2 million.

Notice: Paycheck Protection Program (PPP Loan) resumed January 11, 2021

How and when to apply for Second Round of PPP Loans

Small business owners who would like to be considered for the second draw of PPP loans must apply between January 13, 2021, and March 31, 2021. The SBA is also accepting Second Draw PPP loan applications from participating lenders. All Second Draw PPP Loans will have the same terms regardless of lender or borrower. 

If you wish to begin preparing your application but don’t know where to start, we’re here to help. We will guide you through the entire steps and ensure you fulfill all the requirements, especially if you want to receive 100% PPP loans forgiveness.

Bookkeeping Confidential is a full-service virtual bookkeeping agency that specializes in assisting small businesses and startups maximize profitability. Contact us, today!