If your business received a Paycheck Protection Program (“PPP”) loan from the government’s stimulus efforts in 2020, the CARES Act, you may still be eligible for a second PPP loan. On December 27, 2020 a second stimulus package was signed into law, making significant revisions to the CARES Act and authorizing “Second Draw” PPP loans for existing borrowers. The eligibility requirements are slightly different for this second round of PPP loans, so a business receiving a CARES Act PPP loan may not meet the requirements of an additional loan.
Generally, an eligible business will have 300 or fewer employees. Businesses with multiple locations, such as a restaurant with several locations, may be able to apply for each physical location of the business. The business must have been operating on or before February 15, 2020 and publicly traded companies cannot apply for Second Draw PPP loans. Loan eligibility has been expanded to independent contractors and sole proprietorship, as well.
To be eligible for a PPP loan under this new scheme, a business must have experienced a 25% or more revenue reduction in 2020 in relation to the same quarter in 2019. The guidelines for the loans provide various ways for calculating revenue reduction for businesses that may not have been operational for all fiscal quarters of 2019. For a business that was operational for the entire 2019 year, then any quarter’s revenue may be used. Businesses are required to provide adequate documentation showing that the entity met the revenue loss standard.
Second Draw PPP Loans are eligible for loan forgiveness on the same terms and conditions as First Draw PPP Loans, except Second Draw PPP Loan borrowers with a principal amount of $150,000 or less are required to provide documentation with their application for loan forgiveness of revenue reduction if such documentation was not provided at the time of the loan application. The SBA will guarantee 100% of the Second Draw Loan, and no collateral or personal guarantees are required.
Businesses should work with their lender and attorneys to apply. A borrower must submit the SBA Form 2483-SD (Paycheck Protection Program Second Draw Borrower Application Form) to their lender or the lender’s equivalent form (“Form 2483-SD”). The last day to apply for and receive a Second Draw PPP Loan is March 31, 2021.
If you would like more information on applying for a Second Draw PPP loan, please contact the attorneys at Rock Fusco & Connelly, LLC.