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Second Round of PPP Loans Now Available

The second round of PPP funding has begun. Call it PPP2, if you will.

And some banks started taking applications for the Paycheck Protection Program on January 11. The second round of PPP funding includes $284 billion, and $60 million of that is for businesses that didn’t get a loan the first time.

PPP is a forgivable that’s designed to help struggling small businesses keep employees on their payroll through the coronavirus pandemic. If a borrowing small business spends the money it gets through a PPP loan, it doesn’t have to be paid back to the bank.

Millions of small businesses across the U.S. applied for and got loans during an initial round of funding in 2020, toward the start of the COVID pandemic.

While the program was largely celebrated for offering some financial help to small businesses suddenly closed due to virus mitigation efforts implemented by federal, state and local governments, there were some instances of fraud which are still being investigated and uncovered.

This second round of PPP loans was approved as part of the recent pandemic stimulus bill passed through Congress and signed into law by President Donald Trump.

Second Round of PPP Loans Going to Small Businesses Now

Community Financial Institutions (CFIs) will be the first lenders to accept applications. CFIs include Community Development Financial Institutions, Minority Depository Institutions, Certified Development Companies and Microloan Intermediaries.

Only about 10% of PPP loans came through CFIs during the first round. And the applications will only be exclusive to CFIs for a short time. In a few days, other lenders will offer the second-round loans.

CFIs First to Handle Loan Apps

Why the roll out to CFIs first? To promote access to capital for new borrowers and certain existing PPP borrowers.

The Small Business Administration (SBA) announced that only community financial institutions will be able to make First Draw PPP Loans on Monday, January 11, and Second Draw PPP Loans on Wednesday, January 13.  The PPP will open to all participating lenders shortly thereafter.

This round of the PPP continues to prioritize millions of Americans employed by small businesses by authorizing up to $284 billion toward job retention and certain other expenses through March 31, 2021, and by allowing certain existing PPP borrowers to apply for a Second Draw PPP Loan.

How to Qualify

You have to prove a 25% drop in gross receipts revenue. Gross receipts include sales of products and services, interest, dividends, rents, royalties, fees or commissions.

Need to know fact – your gross receipts DO NOT include the amount of a first-round PPP loan.

Proving the 25% drop in revenue is easier this time around. You can verify the loss using annual tax returns. You can compare 2019 to 2020.

If you haven’t completed the 2020 annual return, you can compare quarterly reports from matching time periods in 2019 and 2020.

Did you use 2019 figures to get a first round PPP loan? If so, you can use the same figures to apply for a second draw, if you go to the same lender and the loan amount is less than $150,000.

If the loan amount is more than $150,000, you’ll need to supply quarterly financial or tax statements from 2020.

If you got a loan in the first round, can you get a loan in the second round? Yes, if you have or will use the full amount, have fewer than 300 employees and can proved that 25% reduction in gross receipts.

Adjusted Timing for Calculating Average Monthly Payroll

You can calculate average monthly payroll using any 365-day period, as long as that period begins after January 1, 2019. In other words, you can use February 1, 2019 to February 1, 2020.

The maximum amount of the loan you can get will be equal to 2 ½ months of your average payroll costs, or $2 million dollars – whichever amount is lower.

What’s New with PPP2?

Here are some changes to the Paycheck Protection Program for the second round of loans:

  • PPP borrowers can set their PPP loan’s covered period to be any length between 8 and 24 weeks.
  • PPP loans will cover additional expenses, including operations expenditures, property damage costs, supplier costs, and worker protection expenditures.
  • The Program’s eligibility is expanded to include 501c6 organizations, housing cooperatives, and destination marketing organizations, among others.
  • PPP2 provides greater flexibility for seasonal employees.

Certain existing PPP borrowers can request to modify their First Draw PPP Loan amount; and

Certain existing PPP borrowers are now eligible to apply for a Second Draw PPP Loan.

Do You Qualify?

You won’t qualify for a loan if:

  • You haven’t spent all the money from the first PPP loan on eligible expenses.
  • Your business is in bankruptcy.
  • Your business was delinquent on a loan from the SBA or any other federal agency during the past 7 years.

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