The Small Business Administration (SBA) reopened the Paycheck Protection Program (PPP) for both First Draw and Second Draw PPP Loans the week of January 11. Applications can be submitted between January 11 and March 31, 2021.
Since the inception of the program, the SBA has made modifications to best assist businesses in continuing need. The following updates had been made to the program: borrowers can determine their preferred loan covered period, between 8 and 24 weeks, to best meet their business needs; in addition to payroll costs, employee benefits, mortgage interest, rent, and utilities, loans will cover additional expenses including operation expenditures, property damage costs, supplier costs, and worker protection expenditures; eligible entities now include 501© non-profits, housing cooperatives, direct marketing organizations, among other types of organizations; and finally, there is greater flexibility for seasonal employees' payroll expenses.
Businesses that have not received a Payroll Protection Program loan to date would qualify for a First Draw PPP Loan. Qualifications include eligible small entities, that together with their affiliates (if applicable), have 500 or fewer employees—including nonprofits, veterans organizations, tribal concerns, self-employed individuals, sole proprietorships, and independent contractors. Entities with more than 500 employees in certain industries that meet SBA’s alternative size standard or SBA’s size standards for those particular industries can also apply. In addition, existing PPP borrowers that did not receive loan forgiveness by December 27, 2020 may either reapply for a First Draw PPP Loan if they previously returned some or all of their original PPP Loan funds, or under certain circumstances, request to modify their First Draw PPP Loan amount if they previously did not accept the full amount for which they are eligible.
The SBA also announced that certain small businesses could be eligible for a Second Draw PPP Loan. A business or organization is generally eligible for a Second Draw PPP Loan if the borrower has no more than 300 employees, previously received a PPP Loan and will or has used the full amount only for authorized uses, and can demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020.
For most applicants, the maximum loan amount of a Second Draw PPP Loan is two and a half times their average monthly 2019 or 2020 payroll costs up to $2 million. For borrowers in the Accommodation and Food Services sector (NAICS 72), the maximum loan amount for a Second Draw PPP Loan is three and a half times their average monthly 2019 or 2020 payroll costs up to $2 million.
Eligible borrowers of First and Second Draw PPP Loans qualify for full loan forgiveness if, during their selected 8 to 24 week chosen period following loan disbursement, the borrower: (a) maintains employee and compensation levels, (b) the loan proceeds are spent on payroll costs and other eligible expenses, and (c) attributes at least 60 percent of the proceeds on payroll costs.