The Second Draw of the PPP initiative, often called PPP2, is now officially open for business. As of January 13, 2021, forgivable loans are once again available to eligible companies who have been affected by COVID-19. The new PPP is currently set to run through March 31, 2021.
Some of the biggest changes between the original PPP and PPP2 are related to eligibility. While businesses are allowed to take out a second PPP loan, the new requirements will likely disqualify some companies that received loans in the original program.
The SBA sets out 3 main requirements for Second Draw PPP loans:
Like the original PPP, PPP2 loans can be fully forgiven if businesses meet the criteria for loan forgiveness. The main idea here has stayed the same: in order to qualify for forgiveness, your business must spend the entire amount within the specified time period, on a certain set of expenses, without significant reduction to employee headcount. However, the details of the requirements for PPP2 loan forgiveness are slightly different:
As with the original PPP, the SBA is not administering PPP2 loans directly. Instead, you’ll submit the PPP Second Draw Application Form to a participating lender. If your usual lender isn’t participating, the SBA website can help you find one that is.
Most businesses can apply for a maximum loan amount of 2.5x their monthly average payroll costs in either 2019 or 2020, with a cap of $2M. An exception is some businesses in the food and hospitality industry, who can apply for up to 3.5x their monthly payroll.
When the time comes, you’ll apply for loan forgiveness through the same lender that originated your PPP2 loan.
This article is provided for informational purposes only, and is not legal, financial, accounting, or tax advice. You should consult appropriate professionals for advice on your specific situation.
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