Second Round of PPP Loans | Approved and On-The Way

President Trump approved a $900 Billion Covid-19 Relief Bill, the Economic Aid to Hard-Hit Businesses, Nonprofits, and Venues Act (the “Act”). The Act provides for another round of Paycheck Protection Program (“PPP”) Loans and expands the categories of eligible expenses that may be paid with loan proceeds.

EFFECTIVE DATE: December 27, 2020. Applications for second-draw loans will be made available soon, with a deadline of March 31, 2021. As with the last round of PPP loans, borrowers are encouraged to apply as soon as possible.

If you need assistance with PPP loan forgiveness or determining if your business qualifies for a second draw PPP loan, please contact Kristina Curry directly at Pickrel, Schaeffer and Ebeling at (937)223-1130 or kcurry@pselaw.com.

Eligibility

  • Borrowers may be eligible to receive a second PPP loan, and the Act also allows first-time borrowers to obtain PPP funds if they meet certain qualifications. The interest rate on a first or second loan will be 1% with a two-year term, and borrowers may still apply for forgiveness up to 100% of the loan.

NEW Eligible Expenses

  • Some of the new eligible expenses which can be used to apply for loan forgiveness will include operations expenditures such as software, human resources, and accounting needs, property damage repairs related to public disturbances that occurred in 2020, and personal protective equipment used to comply with federal, state, or local health and safety guidelines.
  • Borrowers can also spend loan proceeds on certain group insurance benefits, including group life, disability, vision, or dental insurance. These eligible costs are in addition to payroll costs and certain non-payroll costs already established by the previous PPP under the CARES Act.
  • Borrowers will still be required to spend at least 60% of the PPP loan proceeds on eligible payroll costs to qualify for forgiveness.

Changes from Original PPP Draw

  • A PPP second draw has different eligibility requirements than a first draw loan. Below are the requirements for a business to be eligible for a PPP second draw:
  • Have no more than 300 employees and demonstrate that it has experienced at least a 25% reduction in gross revenues between comparable quarters in 2019 and 2020.
  • The SBA measures a “25 % drop in revenue” for a second-draw PPP loan depending on when the business was established.
    • Example: If the business was established before the year 2019, the SBA will compare gross receipts from all quarters of 2019 and 2020 to see if there was at least a 25% drop from one year to the next.
    • The maximum loan amount is 2.5 times the borrower’s average monthly payroll costs, up to $2 million.
    • There are exceptions to the eligibility and loan amount rules for small businesses in the accommodation and food services industries.
AUTHOR: Kristina Curry
kcurry@pselaw.com