How businesses can apply for a second PPP loan
Small businesses hardest hit by coronavirus pandemic may receive second forgivable loan under new stimulus Paycheque Protection Program. The application for “second draw” loans begins January 13 for companies applying through a community financial institution. The SBA will accept applications from other lenders later in the week.
Congress has designated $ 137 billion for PPP second-draw loans under a more funding and a relief program. The bill, enacted on December 27, includes a total of $ 284.5 billion for PPP loans. Businesses that need help beyond their initial loan will be able to apply for a second loan, provided they can show a substantial drop in income and meet the other requirements detailed in same day loans near you.
Here’s everything we now know about Second Draw P3 Loans.
Who is eligible for second-draw PPP loans
If you or your business received an initial PPP loan, you may be eligible for a second round of financing, provided you meet the following conditions:
- Has no more than 300 employees.
- You have used or will use the full amount of your first PPP loan.
- May show a decrease of at least 25% in annual gross revenue or for any quarter of 2020, compared to the same quarter in 2019.
- Have not closed permanently. Businesses that have temporarily closed or suspended their operations can benefit from a second draw loan.
Second-draw PPP loans are available for businesses, some non-profit organizations, self-employed people, independent contractors, sole proprietorships, housing co-ops, small agricultural co-ops, veterans organizations and tribal businesses.
Companies that receive a Save Our Stages grant cannot receive additional PPP loans.
How much you can receive for a second PPP loan
The second-draw PPP loan formula is similar to that of the initial loan: borrowers can receive up to 2.5 times their average monthly payroll costs. Average monthly salary costs can be calculated using any of the following:
Seasonal businesses (typically operating less than seven months per calendar year) and new businesses operating on February 15, 2020, but not open for a full 12 months, will use a separate formula to calculate the average monthly payroll.
- Seasonal businesses: Average monthly payroll for any 12-week period between February 15, 2019 and February 15, 2020.
- New companies: Total salary costs divided by the number of months these costs were paid.
Hotels, restaurants, and other accommodation and food services businesses can borrow up to 3.5 times their average monthly salary costs.
Unlike initial loans, the maximum amount for second-draw PPP loans is only $ 2 million. The first PPP loans reach a maximum of $ 10 million.
” MORE: Coronavirus relief for small businesses and the self-employed
How the money can be used
Second Draw funds are forgivable, provided they are spent on covered costs, including:
- Salary costs, including paid sick leave and group insurance benefits provided by the employer.
- Operating costs, including mortgage, rent, utilities, software, human resources and accounting payments.
- Material damage suffered during demonstrations and disturbances in 2020, unless they are covered by insurance.
- Payments to a supplier covering contracts and purchase orders in effect prior to taking out the second draw loan.
- Personal protective equipment and modifications made to meet health and safety requirements.
At least 60% of the total loan amount must be used on payroll expenses to be eligible for full loan forgiveness.
How to register
In order to apply for a second draw PPP loan, businesses will need to submit documents to verify salary costs and lost income, such as tax forms or bank statements.
You can avoid some red tape by using the same lender for both first and second drawdown loans, as long as you use the 2019 calendar year payroll figures when applying for the second loan. Check with your lender if they are considering offering second draw loans.
Borrowers looking for $ 150,000 or less do not need to prove loss of income when applying for a second draw loan, but they will need to do so to apply for a loan forgiveness.
Second Draw Loan funds may be forfeited if used to cover costs within 8-24 weeks of receiving your loan. The exact timeframe is determined during the loan application. At least 60% of the total second draw loan must be used on payroll expenses to be eligible for a full loan forgiveness. Up to 40% can be used on other covered expenses detailed above.
Business owners who borrow $ 150,000 or less can submit a one-page certification that details the following:
- The number of employees they have retained with the loan.
- An estimate of the portion of the loan devoted to salary costs.
- The total amount of the loan.
- Proof of the eligible loss of income, if it has not already been provided to the lender.
Business owners who borrow more than $ 150,000 will go through the same forgiveness process as required for their first P3 loan. If you fall into this category, you will need documents to show how the money was spent. This could include:
- Salary and staff costs: Tax forms, canceled checks, bank statements, payment receipts and third party payroll reports.
- Operating costs: Receipts for business software, accounting services, utility payments, and lease, lease, or mortgage payments.
- Supplier costs: Purchase orders, contracts and receipts for payments made to suppliers.
- Other covered expenses: Proof of payment for health and safety modifications, such as sneeze guards, ventilation systems, expanded outdoor space and equipment to perform health exams; receipts for the purchase of face masks and other personal protective equipment.