On December 27th, Congress passed a new pandemic relief bill. In addition to stimulus checks, enhanced unemployment benefits, rental assistance, and more, the bill provides a second round of Payment Protection Program (PPP) loans to help small businesses. For small business owners who want to apply for these second draw loans, or PPP2 as they’ve been aptly nicknamed, here’s what you need to know.
Who is eligible for second draw PPP loans?
In order to qualify for a second draw PPP loan, your company must meet the following criteria:
- Have 300 or fewer employees
- Experienced a revenue reduction of 25% or greater in at least one quarter of 2020 in comparison to 2019
- Have used, or expect to use, the full amount of the first PPP loan on or before the second PPP loan is disbursed
How much am I eligible to receive?
Considerably less than the first program, the maximum loan amount for second draw loans is 2.5x your company’s monthly qualifying payroll up to $2 million, excluding yearly compensation of more than $100,000.
What can I spend it on?
To obtain full forgiveness, eligible expenses include everything applicable in the first round PPP loan (payroll costs, mortgage, or rent, and utility payments) and the following additional expenses:
- covered operations expenditures: payments for business software or cloud computing
- covered supplier costs: goods that were essential to the business at the time of the purchase
- covered worker protection expenditures: expenses required to comply with government mandates, like sneeze guards, ventilation systems, and the expansion of outdoor space
- covered property damage costs: costs related to looting or vandalism in 2020 that were not covered by insurance.
Is this loan forgivable?
Yes. Second draw PPP loans are eligible for loan forgiveness on the same terms and conditions as the first PPP loans. That means the money must be spent for the proper purposes during the proper time period.
These are some of the highlights of the Second Draw PPP loans. As always, Boris Benic and Associates continues to closely monitor information coming from the SBA and the U.S. Treasury. We have helped numerous clients in various industries with PPP loan applications and questions and are available to assist you at any time.