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PPP2 Loans Are Now Open

January 13, 2021

PPP loans have been reopened with an infusion of $284 billion for First Draw and Second Draw loans. First Draw loan applications will be accepted from January 11, 2021 to March 31, 2021. Second Draw applications begin January 13, 2021, until March 31, 2021. To promote access for smaller lenders and their customers, SBA will initially only accept Second Draw applications from participating community financial institutions. Key links can be found below.

In December, Congress made important changes to the program as part of the Consolidated Appropriations Act of 2021, and last week, the U.S. SBA released interim final rules for the updated program as well as for Second Draw Loans.

Second Draw loans are available for borrowers with 300 or fewer employees that saw a 25% or greater revenue drop in 2020 compared to 2019 and that will or have used the full amount of their first-draw PPP loan. The maximum loan amount for Second Draw loans is $2 million or two and a half months’ worth of average payroll costs, whichever is less. For loans of up to $150,000, borrowers can simply certify revenue loss when they apply, but will have to produce documentation of that revenue loss to apply for forgiveness.

First Draw loans apply to borrowers with 500 or fewer employees, with a cap of $10 million – the same as in the initial PPP – or two and half months’ worth of coverage payroll costs, whichever is less. First-time PPP borrowers are not required to demonstrate a reduction in revenue to apply. For both First and Second Draw loans, there are a number of calculations to determine eligibility and loan amounts, so be sure to consult your local banker. Public companies do not qualify.

Favorable changes to the program include:

  • Expanding the list of non-payroll expenses that can be paid with PPP funds.
  • Allowing expenses paid for with PPP funds to be tax deductible.
  • Permitting businesses to take advantage of both PPP and the Employee Retention Tax Credit in 2020 and 2021 and,
  • Pepealing the prohibition on the deduction of EIDL advances from PPP forgiveness.

The tax deductibility for expenses applies to loans under both the original PPP and subsequent PPP loans.

Borrowers are still required to spend at least 60% of the funds on payroll over a covered period of either eight or 24 weeks to receive full forgiveness. The other 40% may be used on eligible costs, including certain mortgage expenses, rent and utility payments.s.

Payroll documentation required in the First Draw will be the same for Second Draw loans. No additional documentation will be required for Second Draw loans if the applicant used the full calendar year 2019 for the First Draw and the Second Draw loan lender is the same as the first draw. Second Draw applicants must have utilized the full amount of their initial draw PPP loan on or before the expected date of the Second Draw PPP loan is disbursed. Streamlined forgiveness documentation is available for loans of $150,000 or less.