A second round of Paycheck Protection Program (PPP) loans — second draw loans — will be available soon. Probably in mid-January. The criteria for the second round differs significantly from the first, so read on.
The recent relief and spending bill designated about $280 billion in PPP funding for first-time eligible borrowers. Funds are also available for borrowers who returned some or all of their first PPP loan or for some borrowers who experienced severe revenue reductions.
The loan limit is $2 million and the amount a small business will qualify for is generally 2.5 times its 2019 average monthly payroll. Hotels, restaurants and food service businesses will qualify for 3.5 times its 2019 average monthly payroll.
60% of the loan of the second round of PPP loans must be used for payroll expenses. Other additional expenses eligible for forgiveness include personal protective equipment for employees, property damage, supplier costs, and operating costs such as cloud computing services, accounting expenses and software.
To apply for a second PPP loan, a business must show that they have:
- 300 employees or less (down from 500 in the first round)
- used or will use the full amount of their first PPP loan
- experienced at least a 25% gross revenue decline in any quarter of 2020 as compared to the same quarter in 2019
To prepare for a PPP application, a business should:
- determine its income for each quarter in the calendar years 2019 and 2020
- develop a list of possible lenders
- keep up on the details about applications
If I can help you, please do not hesitate to contact me.