On Thursday, the Treasury Department announced that the SBA will begin accepting PPP 2nd draw applications from small lenders on Friday the 15th, and all other lenders on Tuesday, January 19 from all other lenders.

While it has only been a few days since the SBA has issued guidance, many lenders are still digesting the information and figuring out processes for the new round. Small businesses across the country are anxious to begin the process and prevent a repeat of what occurred back in March/April when funds ran out really quickly leaving some businesses in the dark. The good news is that the pool of eligible borrowers is much smaller this round due to changes in eligibility requirements as well as a reduction in the maximum loan amounts.

While we wait for banks and the SBA to begin accepting applications, Business Loan expert Jerry Freedman has provided the answers to some questions that will help you better understand some of the key changes and aspects of the PPP Program as it relates to the new stimulus package (Economic Aid Act).

Q: I received a PPP loan back in April, can I receive a 2^nd PPP loan? A: Yes. However, you must have used the funds you received in round 1 or you will use those funds by the time your 2^nd PPP loan is disbursed.

Q: What key aspects changed regarding eligibility? A: The business must have had a 25% reduction in gross receipts in any quarter in 2020 relative to the same quarter in 2019, or a 25% reduction on an annual basis in 2020 relative to the entire 2019. All businesses will have to provide internally prepared financial statements, tax returns, or bank statements, to prove the 25% reduction. However, for loans less than $150,000, they can wait till they apply for forgiveness to prove the 25% reduction. Other key changes include an employee limit of 300 (down from 500) across a corporate group of companies, the cap for a single 2^nd draw PPP loan is now $2 million ($4 million across a corporate group), and certain businesses in the hospitality space (NAICS code begins with 72) can get as much as 3.5 times of their average monthly payroll.

Q: My payroll increased in 2020, can I use my 2020 payroll as the basis for my PPP loan thus ensuring a larger loan amount? A: Yes. The SBA is allowing borrowers to use either their 2019 or 2020 average monthly payroll as the basis for their loan amount. 

Q: Can my loan be forgiven? A: Yes. The SBA is using the same 60/40 rule (60% payroll, 40% other costs) as round one but is now allowing the funds to be used for additional supplier and operational costs and still be forgiven.

Q: I never received a PPP loan in the 1^st round, can I apply for my first one now? A: Absolutely. Lenders will be accepting first draw applications. The rules mostly remain the same as the first round except now a 1^st time borrower can utilize 2019 or 2020 payroll as the basis for their loan. The 25% reduction in gross receipts does not apply to 1^st time borrowers.

Q: My business is no longer in operation, can I still apply? A: Unfortunately, business that are no longer in operation or in middle of bankruptcy proceedings, are not eligible.

Q: What if my company only started operations in January of 2020, are we still eligible? A: Yes. Companies that started before February 15, 2020 are still eligible. For such companies, they can compare their Q2, Q3, or Q4, to Q1 to see if they had a 25% drop in revenues, and should utilize their average monthly payroll for the entire 2020 as the basis for their loan amount.

Q: My business is really doing well now, but I can still prove the 25% reduction in gross receipts from earlier in 2020, can I still apply for a 2^nd draw PPP loan? A: It is not advised. Besides for making businesses certify they had the 25% reductions, the applicant must also certify that “Current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant”.

If you have any additional questions regarding the PPP program, or general questions about small business loans, you can reach Jerry by emailing him at [email protected].

[Editor’s Note: You can apply for the PPP here]