The Paycheck Protection Program (PPP) now allows certain eligible borrowers that previously received a PPP loan to apply for a Second Draw PPP Loan with the same general loan terms as their First Draw PPP Loan.
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.
The maximum loan amounts for First and Second draw borrowers is summarized below:
First draw borrowers
2.5 times average monthly payroll costs, same as before
Entities that did not exist for the full one-year period before Feb. 15, 2020, should calculate the maximum loan amount based on 2.5 times payroll cost paid or incurred as of the date of the application divided by the number of months costs were paid or incurred.
Self-employed borrowers who file a Form 1040, Schedule C and are applying for a first draw will also be able to borrow 2.5 times their average monthly net profit based on line 31 of their 2019 or 2020 Schedule C.
Second draw borrowers/or entities that previously received a PPP loan
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.
A borrower is generally eligible for a Second Draw PPP Loan if the borrower:
Previously received a First Draw PPP Loan and will or has used the full amount only for authorized uses
Has no more than 300 employees; and
Can demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020
Forgiveness of first draw is not a requirement for second draw
Please reference this article from SBA for additional information regarding Second Draw PPP loans. Or feel free to contact us if you'd like to discuss how this applies to your situation.
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