How Companies Can Apply for a Second PPP Mortgage

Small companies hit hardest the coronavirus pandemic can quickly obtain a second forgivable mortgage beneath the newly revived Paycheck Safety Program. Congress designated $137 billion for “second-draw” loans as a part of a bigger funding and aid bundle. The invoice, signed into regulation on Dec. 27, features a complete of $284.5 billion for PPP loans.

Companies that need assistance past their preliminary mortgage will be capable to apply for a second mortgage, supplied they’ll present substantial income decline and meet different necessities detailed beneath. The SBA has not but supplied an actual date for when this system will reopen, however it is going to shut on March 31, 2021. Enterprise homeowners who plan to use for a second PPP mortgage ought to collect the required data as quickly as attainable.

In an try to prioritize underserved companies, together with minority-, women- and veteran-owned companies, solely mortgage functions from group monetary establishments shall be accepted for the primary two days when the PPP mortgage portal initially reopens.

Right here’s the whole lot we all know now about second-draw PPP loans.

Who qualifies for second-draw PPP loans

In the event you or your corporation acquired an preliminary PPP mortgage, chances are you’ll qualify for a second spherical of funding, supplied you meet the next necessities:

  • Have not more than 300 staff.

  • Have used or will use the complete quantity of your first PPP mortgage.

  • Can present a drop of a minimum of 25% in annual gross receipts or for any quarter of 2020, in contrast with the identical quarter in 2019.

  • Haven’t completely closed. Companies which have quickly closed or suspended operations can obtain a second-draw mortgage.

Second-draw PPP loans can be found to companies, sure nonprofits, self-employed people, unbiased contractors, sole proprietors, housing cooperatives, small agricultural cooperatives, veterans’ organizations and tribal companies.

Companies that obtain a Save Our Phases grant can’t obtain extra PPP loans.

How a lot you’ll be able to obtain for a second PPP mortgage

The system for second-draw PPP loans is just like that of preliminary loans: Debtors can obtain as much as 2.5 instances their common month-to-month payroll prices. Common month-to-month payroll prices could be calculated utilizing one of many following:

  • The 12 months previous to the mortgage.

Seasonal companies (usually working for lower than seven months in a calendar yr) and new companies in operation on Feb. 15, 2020, however not open for a full 12 months, will use a separate system to calculate common month-to-month payroll.

  • Seasonal companies: Common complete month-to-month payroll for any 12-week interval between Feb. 15, 2019, and Feb. 15, 2020.

  • New companies: Complete payroll prices divided the variety of months these prices have been paid out.

Resorts, eating places and different lodging and meals service companies can borrow as much as 3.5 instances their common month-to-month payroll prices.

Not like preliminary loans, the utmost quantity for second-draw PPP loans is simply $2 million. First-time PPP loans max out at $10 million.

How the cash can be utilized

Second-draw funds are forgivable, supplied they’re spent on lined prices, together with:

  • Payroll prices, together with paid sick depart and group insurance coverage advantages supplied the employer.

  • Working prices, together with funds for mortgage, hire, utilities, software program, and human assets and accounting wants.

  • Property injury sustained throughout protests and disturbances in 2020, until lined insurance coverage.

  • Funds to a provider masking contracts and buy orders in impact earlier than taking out the second-draw mortgage.

  • Private protecting tools and modification made to satisfy well being and security necessities.

A minimum of 60% of the whole mortgage quantity have to be used on payroll bills to qualify for full mortgage forgiveness.

Methods to apply

With the intention to apply for a second-draw PPP mortgage, companies might want to submit paperwork to confirm payroll prices and income loss, corresponding to tax varieties or financial institution statements.

You’ll be able to keep away from some paperwork through the use of the identical lender for first- and second-draw loans, supplied you utilize payroll figures from calendar yr 2019 when making use of for the second mortgage. Verify together with your lender to see whether it is planning to supply second-draw loans.

Debtors looking for $150,000 or much less don’t must show income loss after they apply for a second-draw mortgage however will want to take action with the intention to apply for mortgage forgiveness.


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Mortgage forgiveness

Second-draw mortgage funds could be forgiven if they’re used on lined prices inside eight to 24 weeks of receiving your mortgage. The precise timeframe is decided while you apply on your mortgage. A minimum of 60% of the whole second-draw mortgage have to be used on payroll bills to qualify for full mortgage forgiveness. As much as 40% can be utilized on different lined bills detailed above.

Enterprise homeowners who borrow $150,000 or much less can submit a one-page certification that particulars the next:

  1. The variety of staff they retained on account of the mortgage.

  2. An estimate of how a lot of the mortgage was spent on payroll prices.

  3. Proof of qualifying income loss, if not already supplied to the lender.

Enterprise homeowners who borrow greater than $150,000 will full the identical forgiveness course of required for his or her first PPP mortgage. In the event you fall into that class, you’ll want documentation to indicate how the cash was spent. This might embody:

  • Payroll bills and headcount: Tax varieties, canceled checks, financial institution statements, cost receipts and third-party payroll studies.

  • Working prices: Receipts for enterprise software program, accounting companies, utility funds and rental, lease or mortgage funds.

  • Provider prices: Buy orders, contracts and receipts for funds made to distributors.

  • Different lined bills: Proof of cost for well being and security modifications, corresponding to sneeze guards, air flow methods, expanded out of doors house and tools to carry out well being screening; receipts for the acquisition of face masks and different private protecting tools.

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