The SBA has announced that applications for both first- and second-draw PPP forgivable loans will open today, Friday, for lenders with a maximum of $1 billion in assets. Lenders with larger assets will start accepting first- and second-draw loan applications on Tuesday, Jan. 19 until March 31, 2021. PPP loan application started last Jan 11 with the first two days exclusively for first-time applicants from community financial institutions that serve minority and women-owned businesses. Second-time borrowers within this category started applying this Wednesday, Jan 13.
How can I be eligible?
Borrowers who have previously received a PPP loan are eligible to avail for the second loan, provided:
- The business does not exceed 300 employees and must have experienced a revenue decrease of 25% or greater in 2020 relative to 2019.
- Full amount of First-draw PPP loan received should have been or will be used, on or before the expected date on which the Second Draw PPP Loan is distributed to the borrower.
- Borrower must have spent the full amount of the first PPP loan on eligible expenses based on PPP guidelines.
The 25% revenue reduction is calculated either by comparing gross receipts between comparable quarters in 2019 and 2020; or through submitting copies of a borrower’s annual tax forms that indicate the decrease in annual receipts of at least 25% in 2020 compared with 2019. The new IFR guidance defines ‘’gross receipts’’ as all revenue in whatever form received from whatever source (such as sales, interest, dividends, rents, fees, royalties, etc.), reduced by returns and allowances. It should be noted, first draw forgiven PPP loans are excluded from your 2020 gross receipts.
How much can I receive?
For eligible 2nd-time borrowers, you can receive loan funds based on 2.5 times the average total monthly payroll cost in 2019, capped at $2 million. NAICS Code 72 entities, on the other hand, are eligible to utilize 3.5 as the multiplier, still subject to the $2 million maximum. These generally include restaurants and hotels who have suffered the most during the pandemic.
What are the ‘’eligible costs’’ for loan forgiveness?
Your second-draw loan will be forgiven if it is utilized on eligible costs such as payroll, rent, covered mortgage interest, and utilities just like the previous rules. At least 60% must be spent on payroll within the eight or 24 weeks covered period of your loan. Additionally, qualifying expenses have been expanded to include:
- Covered worker protection and facility expenditures (incl. PPEs) in compliance with the COVID19 guidelines.
- Covered property damage expenditures related to the 2020 public disturbances that were not covered by insurance or other compensation.
- Covered Costs to essential suppliers
- Covered operating costs, (incl. softwares or cloud services needed in business operations, delivery, payroll expenses, sales and billing, HR, or accounting or tracking of supplies, inventory, records, and expenses).
How can I apply?
For second time borrowers, borrowers can apply for a loan through any participating lender or institution.
- Borrowers for loans greater than $150,000, must show documentation such as quarterly or annual tax forms, financial statements or bank statements that prove they experienced at least 25% revenue decrease in 2020 relative to 2019. Lenders must then review the borrower’s calculations and supporting documents.
- For loans less than or equal to $150,000, documentation is NOT needed to be sent to the lender during the application, but should be submitted on or before the borrower applies for loan forgiveness.
The SBA has released Form 2486 for second-time applicants planning on availing the program. If you need assistance on applying for a PPP loan, book a consultation with us at https://calendly.com/levine-and-associates or send us an email at josh@levineandassoc.com.