Second Round of the Paycheck Protection Program

The Consolidated Appropriations Act signed in late December 2020, provided $900 billion in COVID relief for individuals and small businesses. Included in the relief act is $284 billion for a second round of Paycheck Protection Program (PPP) loans for new borrowers and second-draw loans for existing borrowers. Here are the eligibility requirements for a second draw (PPP2) loan:

1) The borrower must spend the full amount of the first PPP loan before receiving the PPP2 loan.

2) The borrower must employ no more than 300 employees per physical location.

3) The borrower must demonstrate a 25% or more reduction in gross receipts in a quarter during calendar year 2020 compared to the same 2019 quarter.

Note: Gross receipts includes all revenue in whatever form received or accrued (in accordance with the entity’s accounting method) from whatever source, including the sales of products or services, interest, dividends, rents, royalties, fees, or commissions, reduced by returns and allowances. Gross receipts do not include taxes collected for and remitted to a taxing authority (such as sales tax) or proceeds from transactions between affiliates.

The size of a PPP2 loan can be up to 2.5 times the average monthly payroll costs during the 1-year period before the loan or during the 2019 calendar year. A borrower in the hospitality or food services industry (with an NAICS code beginning with 72) is eligible for a loan of up to 3.5 times average monthly payroll costs. The amount of each PPP2 loan is subject to an overall cap of $2 million.

The costs eligible for loan forgiveness have been expanded in the Consolidated Appropriations Act. In addition to the first round PPP eligible costs of payroll, rent, covered mortgage interest and utilities, additional costs eligible for loan forgiveness are:

  • Covered worker protection and facility modification expenditures (including PPE) to comply with COVID-10 federal health and safety guidelines.
  • Covered property damage costs related to property damage and vandalism or looting due to public disturbances in 2020 not covered by insurance.
  • Expenditures to suppliers that are essential at the time of purchase to the recipient’s current operations.
  • Covered operating expenses, including payments for any business software or cloud computing service that facilitates business operations, product or service delivery, processing, payment or tracking of payroll expenses, human resources, sales and billing functions or accounting and tracking of supplies, inventory, records, and expenses.

Borrowers that receive a PPP loan of $150,000 or less shall receive forgiveness if the borrower signs and submits to the lender a certification that is not more than one page in length. The certification should include a description of the number of employees the borrower was able to retain because of the loan, the estimated total amount spent on payroll costs and the total loan amount. The new simplified application will be available from the SBA no later than January 20, 2021.

If you are interested in applying for a first time PPP or a second draw PPP loan, please reach out to us to assist you with the eligibility requirements and application process.