Paycheck Protection Program Second Draw Loans
The SBA and Treasury issued a new interim final rule for the Paycheck Protection Program Second Draw (PPP2D) in the late evening on January 6, 2021. Applications are not available as of this writing, but we expect banks to make them available soon. The SBA has indicated that the application form will be SBA Form 2483-SD. This form is not currently posted on the SBA or Treasury website. Please contact your bank or lending institution directly to determine application availability. Once they are available, applications will be accepted until March 31, 2021, or until allocated funds are exhausted. The new interim final rule does not clarify all issues with the legislation, but it does add some additional insight.
PPP2D Basic Requirements and Calculations
- Employee Limits
- For first-time borrowers, businesses must have 500 or fewer employees. Borrowers applying for a second PPP loan must have 300 or fewer employees.
- Certain businesses over the respective employee limits above, including franchises and NAICS 72 businesses (Accommodation and Food Services), may still qualify.
- Businesses using a Professional Employer Organization (PEO), or transitioning to a PEO, that meet the eligibility criteria for a loan can apply.
- The $100,000 salary limitation only applies to cash compensation and does not include health care, retirement benefits, and state and local taxes.
- Gross Receipts
- NEW: Subsection (c)(2) of the IFR generally defines gross receipts to include all revenue in whatever form received or accrued (in accordance with the entity’s accounting method) from whatever source, including from the sales of products or services, interest, dividends, rents, royalties, fees, or commissions, reduced by returns and allowances.
- Certification of Need
- All borrowers applying for a PPP loan need to meet the SBA’s certification of need requirement, attesting that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.”
- Revenue Requirements
- Businesses applying for a second PPP loan will need to demonstrate at least a 25% percent reduction in revenue between corresponding quarters in 2019 and 2020.
- The borrower may select the relevant quarter for comparison. Special rules apply to borrowers that were not in business for all or part of 2019.
- NEW: Businesses that do not have quarterly financial data can use annual filings and reports to show a 25% annual decrease to qualify for PPP2D.
- Borrower must have spent all of the proceeds from the first PPP loan before funds from the second loan are disbursed.
- Time Period
- Standard: The Economic Aid Act provides that the relevant time period for calculating a borrower’s payroll costs for a Second Draw PPP Loan is either the twelve-month period prior to when the loan is made or calendar year 2019.
- NEW: Calendar year 2020
- NEW: Special calculations for seasonal businesses, NAICS code 72 businesses, farmers and ranchers