PPP Second Draw – Eligibility
- Borrowers must have previously received a PPP loan (First Draw PPP loan)
- The funds from the first draw have to be fully used for authorized purposes on or before the expected date of disbursement of the Second Draw
- Loans are available through March 31, 2021
- The borrower must have 300 employees or fewer
- The borrower must have a 25% or more reduction in revenue in 2020 compared to 2019
PPP Second Draw – Revenue Reduction Calculation
- Compare quarterly gross receipts for one quarter in 2020 with gross receipts of a corresponding quarter in 2019
- Example:
- 2019 Q1 Revenue – $10,000
- 2020 Q1 Revenue- $5,000
- 50% reduction qualifies for PPP Second Draw
PPP Second Draw – Revenue Reduction Calculation Continued…
- For borrowers that were in business for all of 2019, you can use an annual calculation
- 2020 annual receipts must show a 25% or greater reduction compared to 2019 annual receipts
- The borrower will need to provide annual tax returns to show this
- This is good for borrowers who do not have revenue information by quarter readily available
PPP Second Draw – Calculations
- The second draw uses the same basis of 2.5 times average monthly payroll costs or Schedule C income, similar to the First Draw calculations
- The limit is $2 million
- Can use 2019 payroll OR 12 months before the loan being made
PPP Second Draw – Calculation Special Case
- EXCEPTION- North American Industry Classification System Code 72 entities (food vendors, restaurants, hotels, etc.) can use a 3.5 multiplier
- https://www.naics.com/six-digit-naics/?code=72
PPP Second Draw – Application
- Loans over $150k-
- Submit documentation of revenue reduction of 25% or more
- Loans under $150k-
- Revenue reduction documentation is NOT required at the time of the application
- Revenue reduction documentation must be submitted on or before the date of application for loan forgiveness
Loan Terms
- No collateral required
- No personal guarantees
- 1% interest rate calculated on a non-compounding, non-adjustable basis.
- Five-year maturity
- Lenders are permitted to rely on certifications of the borrower to determine the borrower’s eligibility and use of loan proceeds
Exclusions
- Any entity that was ineligible to get the First Draw
- Any business primarily engaged in political or lobbying activities
- Entities organized in China
- Publicly traded companies
Questions? Contact Bette!
Send an email- bette@bettehochberger.com
Schedule a Zoom call- calendly.com/bettehochberger/15-minute-meeting
Check out the website for more info
https://bettehochberger.com/