SBDC Questions and Answers
I Exhausted My Initial PPP Loan, How Does This Help Me?
Answered 2 years ago
The brand new “Second Draw” program is for small businesses, non-profits, sole proprietors, and independent contractors who have exhausted their initial PPP loan. The program will make new loans through March 31, 2021 or until the new funding is exhausted.
Eligibility: You are eligible for a second draw loan if you have exhausted your first PPP loan and
- you have no more than 300 employees, and
- you have experienced a greater than 25% reduction in gross receipts during the first, second, third, or fourth quarter in 2020 relative to the same quarter in 2019.
Entities with significant ties to China are ineligible for a second draw loan.
Loan Amount: The maximum loan amount is the average monthly payroll costs for the entity during the 12 months prior to the loan or, at the election of the borrower, 2019 multiplied by 2.5 (or 3.5 for employers in the accommodation and foodservice industry).
Seasonal employers utilize average monthly payroll costs for a 12-week period between February 15, 2019, and February 15, 2020.
A loan may not exceed $2 million.
Loan Forgiveness: The amount of loan that can be forgiven is the lesser of:
- Costs incurred or expenditures made between the date of the origination of the loan and ending on a date of your choosing that is between 8 and 24 weeks after origination for: (a) payroll costs, (b) qualifying mortgage interest or rent obligations, (c) covered utility costs, (d) covered operations costs, (e) covered property damage, (f) covered supplier costs, and (g) covered worker protection expenditures; or
- Payroll costs for the same period divided by 0.60 (this serves as a cap on the total loan forgiveness to ensure that at least 60% of the total amount forgiven is for payroll costs).
Like original PPP loans, the amount of loan forgiveness can be reduced if the borrower has (1) reduced the number of employees or (2) employee salaries by more than 25%. However, the same safe harbors that apply to original PPP loans apply to Second Draw loans. Learn more about these Safe Harbors in this Guide for PPP Loan Forgiveness.
Set-Asides: $25 billion is set aside for employers with 10 or fewer employees or for loans less than $250,000 for entities located in a low-income neighborhood.