PPP Second Draw Loans

Ineligible Businesses (not comprehensive)

• Businesses that are permanently closed are not eligible for a PPP loan. 
• If the applicant or the owner of the applicant is the debtor in a bankruptcy proceeding, either at the time it submits the application or at any time before the loan is disbursed, the applicant is ineligible to receive a PPP loan.
• If the applicant has defaulted on a loan guaranteed by the US Small Business Administration, they are ineligible to receive a PPP loan.

• For loans less than $150,000, NO additional documentation is required when submitting an application for a Second Draw PPP Loan with the same PPP lender. The borrower must submit supporting documentation of revenue reduction on or before the date the borrower applies for loan forgiveness for the Second Draw PPP Loan or upon SBA request.
• For loans greater than $150,000, the borrower must submit supporting documentation to support a revenue reduction of 25% or greater in 2020 compared to 2019. Such documentation may include:
  • Annual tax forms, or
  • Quarterly financial statements or bank statements.

PPP Loan Terms 

• Loan is generally fully or partially forgivable if at least 60% is used on payroll expenses.
• If not fully forgiven, the balance will turn into a 5-year, 1%-APR, term loan. Payment is deferred for 12 months.
• Loan to business, no personal guaranty. SBA guaranty is 100%. 
• All FAQ’s from the original round of PPP loans apply here except as otherwise stated below.

Definitions 

• Eligible uses include payroll, payments for mortgage interest, rent, utilities, covered operations expenditures, covered property damage costs, covered supplier costs, and covered worker protection expenditures and facility modification expenditures incurred on or after March 15, 2020, including personal protective equipment to comply with COVID-19 federal health and safety guidelines. Additionally, eligible costs now include operating costs for software and cloud computing services and accounting needs and property damage costs related to property damaged and vandalism or looting due to public disturbances that occurred during 2020 that was not covered by insurance or other compensation 
  
  * Updates to the program announced in February 2021 expanded eligible uses. See the latest updates at Equitable PPP Home.
  
• Gross receipts includes all revenue in whatever form received or accrued (in accordance with the entity’s accounting method) from whatever source, including from the sales of products or services, interest, dividends, rents, royalties, fees, or commissions, reduced by returns and allowances.

How to Calculate Loan Amount

For corporations, partnerships, and multi-member LLC, the calculation is still 2.5x the Average Monthly Payroll. For businesses with NAICS codes starting with 72- (Food and Accommodation, including restaurants, hotels), the loan request can be 3.5x the Average Monthly Payroll. 

For Schedule C-filers (sole proprietors, independent contractors, self-employed), the Average Monthly Payroll can be based on Gross Profit reported on Schedule C (Line 7), or Net Profit (LINE 31, as before), plus actual employee payroll and expenses.

How to Verify Revenue Reduction 

• A borrower that was in operating for four quarters in 2019 must show annual receipts of 25% or greater in 2020 compared to 2019. 
• For a business that was new in 2019 - Compare gross receipts from any quarter in 2020 to any quarter during which the business was operational in 2019.
• For a business that was new in 2020 (prior to 2/15/20) - Compare gross receipts from Q1 (Jan-Feb, 2020) to Q2 or Q3 or Q4 to show 25% revenue reduction compared to the 1st quarter of 2020.
  
• A borrower that does not meet 25% annual decline in revenue, or that was not in operation in all four quarters of 2019, may still meet the revenue reduction requirement under one of the quarterly measurements of revenue.