Rose Report: Issue 43

Small Business Relief: Round 2

As COVID rages on, SBA reopens Paycheck Protection Program

Last year proved to be a tough year for businesses due to the COVID-19 pandemic—even for those that received funding from the initial Paycheck Protection Program (PPP). Recognizing the hardship that COVID-19 has placed on companies, the Small Business Administration (SBA) in consultation with the U.S. Treasury Department has reopened the popular PPP loan for companies seeking funding for the first time as well as eligible borrowers that previously received a PPP loan. Here’s what you need to know about the second draw loan.

Who is Eligible for a Second Draw PPP Loan?

According to the SBA, borrowers may be eligible for a second draw loan if they previously received a PPP loan and will or have used the full amount for authorized uses. Additionally, borrowers may not have more than 300 employees and need to demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020.

When Can You Apply for the Loan?

Borrowers can apply for a Second Draw PPP Loan until March 31, 2021.

What Can PPP Funds Be Used For?

The SBA states that PPP funds can be used to help fund payroll costs and benefits, pay for mortgage interest, rent, utilities, worker protection costs related to COVID-19, uninsured property damage costs caused by looting or vandalism during 2020, and certain supplier costs and expenses for operations.

What is the Maximum Amount that Can Be Borrowed?

According to the SBA, for most borrowers, the maximum loan amount of a Second Draw PPP Loan is 2.5x average monthly 2019 or 2020 payroll costs up to $2 million. For borrowers in the Accommodation and Food Services sector (use NAICS 72 to confirm), the maximum loan amount for a Second Draw PPP Loan is 3.5x average monthly 2019 or 2020 payroll costs up to $2 million.

What Are the Terms of the Loan?

The second draw PPP loan will have the same general loan terms as a company’s first draw loan.

Where Can You Find Guidance?

On January 19, 2021, the SBA in consultation with the Department of the Treasury provided guidance to assist businesses in calculating their revenue reduction and payroll costs in order to determine eligibility and maximum loan amounts for second draw loans. Additionally, the guidelines outline the documentation that will be required. If you need additional guidance in navigating the second draw PPP loan or have additional questions, please reach out to RFS as soon as possible.

At RFS, we focus on being your trusted advisor and helping you succeed in your own mission through strategic financial management. Organizations turn to us to overcome financial challenges, create proactive strategies, and to help them achieve their goals with financial confidence.