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Round two of the Paycheck Protection Program, officially called “The Second Draw Loan” was recently passed.  For the businesses waiting eagerly and wondering what has changed, how it will apply to them, and if they need to take advantage of round two, we have your fact sheet ready.  

PPP Round Two

When Can I Apply?

The SBA and banks are open to receiving applications now, through March 31, 2021.  If you are ready to apply, it is time to get your items in order.  The banks are ready for you.

Can I Use A Simplified Application?

Depending on the loan amount needed, yes.  In round two, they have offered a simple application for loans totaling $150,000 and under.

Am I Eligible?

Most likely.  Here are a few bullet points regarding eligibility:

  • If you received funding in round one of the PPP loans, you can apply again.  

  • It is also open to first time applicants; you can get a first round of PPP (if you didn't get the original PPP loan). On that, you are not required to show a decrease in revenue.

  • For second time applicants, you will need to show proof of a 25% decrease in revenue from gross receipts quarter-over-quarter; meaning, comparing one quarter in 2020 to the corresponding quarter in 2019.  

  • There are some rules where showing or year-over-year change in revenue from 2019 to 2020 is also allowed, but work with your accountant to know if this applies to your situation.  

  • You need to have 300 or fewer employees.

  • If you received the first loan you need to have spent all of that money before applying for a second round.

Terms of The Second Loan

PPP Round Two loans will have very similar terms to the original loans from 2020, but there are a few changes to note:

  • The repayment terms of round two will be the same as the first one, if it is not forgiven (check those out here).

  • Your loan amount will be based 2.5 times your average monthly payroll for 2019 or 2020.

  • If you are a specifically hard hit business such as a hotel or restaurant, you qualify for 3.5 times your average monthly payroll amount, up to $2mil.

  • The loan is based upon covering payroll costs; but you are also able to cover basic expenses with the funding, like last time (mortgage, rent, utilities, etc.) but round two has expanded eligible expenses, including:

    • Worker protection costs related to COVID-19

    • Uninsured property damage cost caused caused by looting or vandalism during 2020

    • Certain supplier costs and expenses for operations

  • You have to have been in operation during/as of February 15, 2020, or still in operation - the goal of this loan is to support the ongoing operations of the applicant.

  • Like round one, There's an eight or 24 week covered period following loan disbursement; you have to keep employee compensation levels the same and spend it on eligible expenses.

What Are The Payroll Stipulations?

There are payroll caps, like the first round.  For example, you can not take more than $100k per year, per employee, and there are stipulations as it applies to business owner salaries.  There are stipulations based on business types too.

  • There are also caps on owner related payroll that depend on how you calculate payroll.

  • There are different ways to calculate owner payroll, depending on the type of entity you have: partner/partnership, schedule C, S-corp, or C-corp.  

Again - consult the accounting pro that knows your business best, to see what you need to consider.

What About Loan Forgiveness and the EIDL Advance Payment For Round One?

  • The PPP Loan Forgiveness amount for round one of PPP will no longer be reduced by the EIDL Advance (Up to $10k). Previously this was to be reduced, and you were required to pay it back, but that is no longer the case.

  • If you submitted an application for the PPP loan forgiveness, you are good to go.  

  • If you have an application for loan forgiveness already submitted, the SBA is prepared to handle that process for you already.  

The Major Items to Consider

We boiled down the major items to consider that may affect your eligibility for round two, or if you even need it.

  1. You have until March 31st to get your application in

  2. Can you show a 25% decrease in revenue quarter-over-quarter/year-over-year from 2019 to 2020? (NOTE:  This is only if you received round one of the PPP loan)

  3. Will you be able to cover payroll expenses for that covered period?

  4. Did you do the first round of PPP?  If so, that may leave you with more stringent qualification requirements.

We hope this information helps you narrow down your choices and better understand what you need to seek funding from round two of the PPP loans. 

• • •

There are a lot of resources available online and through the SBA to help, but if you need some more in-depth guidance for your business, feel free to reach out to us.

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