Second round of PPP loans: how much and who is eligible?
The second round of Paycheck Protection Program puts an emphasis on underserved businesses, but all eligible businesses under 500 employees can apply.
As part of the covid-19 relief bill passed by Congress in December a new round of Paycheck Protection Program (PPP) loans was approved. Some businesses will be eligible for a second forgivable loan with some of the rules changing for the better. Businesses that took out a first loan may be eligible to apply for additional funds through their first loan if they didn’t take out the full amount in the first round.
The bill includes a total of $284.5 billion for PPP loans with the focus on low to moderate income areas. As well the bill attempts to give priority to underserved businesses. Congress specifically designated $137 billion for Second Draw loans as part of a $900 billion coronavirus relief bill signed into law on 27 December. Although there was no specific bill for restaurants and bars, under the new program they receive a higher calculation rate.
What businesses are eligible for a PPP loan?
The new round of Payment Protection Program loans is available to businesses that have not yet received a PPP loan and to businesses that have. The eligibility requirements are different in each case.
First Draw PPP loans
The following requirements apply to the businesses that are seeking a first PPP loan in 2021.
- The business was operational before February 15, 2020
- The business is not permanently closed. The business is still open and operational
- The business has no more than 500 employees
- If the business has multiple locations, and has no more than 500 employees per location
Second Draw PPP loans
The following requirements apply to the businesses that are seeking a second PPP loan in 2021.
- The business has used up the first PPP loan
- The business was operational before February 15, 2020
- The business is not permanently closed. The business is still open and operational
- The business has no more than 300 employees
- If the business has multiple locations and no more than 300 employees per location
- The business can show a 25% or greater reduction in gross revenue
How much money can a business get with a PPP loan?
The formula for the second round of the Paycheck Protection Program is similar to the initial round of loans. Borrowers can receive up to 2.5 times their average monthly payroll costs. Average monthly payroll costs can be calculated using one of the following:
- The 12 months prior to the loan.
- Calendar year 2019.
- Calendar year 2020.
Seasonal businesses which typically operate for less than seven months in a calendar year, and new businesses not open for a full 12 months, but in operation on 15 February, 2020, will use a separate formula to calculate average monthly payroll.
- Seasonal businesses: Average total monthly payroll for any 12-week period between 15 February, 2019, and 15 February, 2020.
- New businesses: Total payroll costs divided by the number of months those costs were paid out.
Restaurant and accommodation industry with an NAICS 72 assignation code can get a loan of up to 3.5 times your average monthly payroll instead of the normal 2.5 times.
Unlike initial loans, the maximum amount for Second Draw PPP loans is just $2 million. First Time PPP loans have a ceiling of $10 million.
The loan is forgiven when an employer documents that the money has been used properly. To find out how to apply for a PPP loan and the forgiveness rules click here.