A Guide To Second Draw PPP Loans And Requesting A Loan Increase
The Economic Aid Act, which was signed into law on December 27, 2020, allows businesses to apply for a second Paycheck Protection Program (PPP) loan, as well as for borrowers who have already received a loan to request an increase in their original loan amount. Let’s look at the specifics of second PPP loans and loan increase requests.
Who can apply for a second PPP loan?
If your business was open for all four quarters of 2019, you can compare total annual receipts in calendar year 2020 to total annual receipts in calendar year 2019. If your business was open for all four quarters of 2019, you can compare total annual receipts in calendar year 2020 to total annual receipts in calendar year 2019.
What’s included in gross receipts?
Include all revenue in whatever form it was received or accrued, according to your accounting method, except the forgiveness amount of your first draw PPP loan or an EIDL grant that you received and recorded in 2020 revenue. It’s fine if you haven’t submitted the forgiveness application for your first PPP loans.
Who can’t apply for a second draw loan?
Persons engaged in political or lobbying activities, as well as businesses that have permanently closed, are not eligible for second-draw PPP loans. Those who have previously received a second-draw PPP loan can apply for a second draw loan, but must first apply to the Public Private Partnership (PPP) board.
What’s the maximum loan amount?
The maximum loan amount for NAICS 72 entities is the lesser of 3.5 times your average monthly payroll costs in 2019, 2020, or $2 million 12 months prior to the application; maximum loan amounts will be lower if you apply for a second draw loan.
What documentation do I need?
If you use your calendar-year 2019 payroll costs to determine both your first and second PPP loans, you won’t need any additional documentation. For loan amounts over $150,000, you’ll need to submit documentation proving the 25% gross receipts reduction; however, if you use your calendar-year 2019 payroll costs to determine both your first and second PPP loans, you won’t need any additional documentation.
How do I apply for a second PPP loan?
You can apply for a second draw PPP loan using Form 2483-SD, and you’ll calculate your loan amount using the same eligible payroll costs as you did for the first one.
When can I apply?
The deadline to apply for a second draw loan is May 31, 2021, but you can start applying as early as January 13, 2021, and the loan can last up to three and a half years, depending on the draw.
Who can request an increase?
If you didn’t accept the full amount of your PPPP loan, you can request an increase up to the amount previously approved by May 31, 2021, by submitting Form 2483. You could also apply for a second draw loan.
Farmers and ranchers
If you received a PPP loan before December 27, 2020, you can request a recalculation of your loan amount using the new gross income formula: 2019 or 2020 Schedule F gross income (capped at $100,000 / 12) x 2.5 = Maximum loan amount If you have employees, you can include their wages and employer-paid benefits, as well as retirement benefits, in your loan amount.
Any partnerships that received a PPP loan and only included amounts for employee payroll costs and other eligible operating expenses, but not partner compensation, can request a loan increase.
What if I received an EIDL Advance?
Great question! According to the Economic Aid Act, any EIDL Advance amounts deducted from your PPP forgiveness amount will be refunded to you with interest.
How much is the second PPP loan amount?
The maximum amount for second-draw PPP loans, unlike initial loans, is only $2 million, allowing hotels, restaurants, and other accommodation and food service businesses to borrow up to 3.5 times their average monthly payroll costs.
What is the formula for calculating PPP loan?
You’ll calculate your PPP loan amount by taking your gross income (not to exceed $100,000), dividing it by 12, and multiplying that number by 2.5.
How long do I have to use the 2nd PPP loan?
The deadline for lenders to submit applications for Second Draw PPP Loans under the Extension Act is May 31, 2021, and the SBA will have an extra 30 days to process applications received before June 1, 2021.
Who is eligible for the second round of PPP loans?
A business must have 300 employees or fewer to be eligible, and gross receipts must have decreased by 25% in any quarter from 2019 to 2020, indicating that the company has experienced financial hardship. Gross receipts include all revenue, including interest and dividends.
What is the average PPP loan amount?
The average loan size in the industry is around $107,000.
How much of a PPP loan can I get?
Your maximum PPP loan amount will be 2.5 times your average monthly payroll costs, up to $10 million; however, because you can only receive one PPP loan, you should apply for the maximum amount you are eligible for.
How do you calculate monthly PPP payroll?
Here’s how you go about it:
- Step One: Use your 1099-MISC forms and income statement to complete your Schedule C.
- Step Two: Divide $16,000 by 12 months.
- Step Three: Multiply your average monthly payroll amount by 2.5, which equals $3,333.33.
- Further reading: How to Calculate Gross Income for the PPP.
Will I get my second draw PPP loan Womply?
To ensure that your Second Draw loan is submitted to the SBA only after your First Draw loan is fully disbursed, we will ensure that your Second Draw loan is submitted to the SBA only after their database registers your First Draw loan in the correct status.
Will I still get my second draw PPP loan?
You can still qualify for a second draw loan if you certify that you have spent, or will spend, the full amount of your first PPP loan on eligible expenses before your second draw PPP loan is funded.
Is PPP still available today?
Existing borrowers may be eligible for PPP loan forgiveness, and the SBA also offers additional COVID-19 relief. The Paycheck Protection Program (PPP) ended on May 31, 2021; existing borrowers may be eligible for PPP loan forgiveness.
What are the new rules for PPP loan forgiveness?
The “60/40 split” remains in effect: borrowers must spend at least 60% of their loan on eligible payroll costs and no more than 40% on eligible non-payroll costs to receive maximum loan forgiveness. The SBA wrote in an interim final rule: “At least 60% of the PPP loan proceeds shall be used for payroll costs.”
How do you qualify for PPP 2?
A borrower is generally eligible for a PPP 2 Loan if it has 300 or fewer employees and experienced a revenue reduction of 25% or more in 2020 compared to 2019, as calculated by comparing the borrower’s quarterly gross receipts for one quarter in 2020 with the borrower’s quarterly gross receipts for the corresponding quarter in 2019.