PPP Second Draw Loan

In the waning days of the 116t^h Congress, lawmakers passed, and President Trump signed into law an omnibus spending bill combined with a COVID economic stimulus bill. Inserted into the thousands of pages of legislation was a second round of Paycheck Protection Program (PPP) loans allocated to the most damaged companies.

You can view the first rule in its entirety here. This rule breaks down the changes to the original PPP program. The second rule here outlines new terms to which the PPP second draw loan.

The Small Business Administration (SBA) has released additional support documents; please view their top-line guidance here.

As always, please consult your bank or loan officer to determine if your eligible or in need of a second PPP draw. If you have any questions regarding the updated program, please do not hesitate to reach out to Advocacy@tianet.org.

Eligible Entities - Qualifications of entities for a PPP Second Draw.

• Traditional businesses, LLC and Corporations, independent contractor, eligible self-employed individual, sole proprietor, nonprofit organization eligible for a First Draw PPP Loan, veteran’s organization, Tribal business, housing cooperative, small agricultural cooperative, eligible 501(c)(6) organization or destination marketing organization, or an eligible nonprofit news organization that:
  • Has used, or will use, the full amount of its First Draw PPP loan;
  • Employs not more than 300 employees; and
  • Experienced a reduction in revenue of at least 25% in gross receipts in 2020 relative to 2019.

Calculation of Revenue Reduction.

• The borrower has experienced a reduction in annual receipts of 25% or greater in 2020 compared to 2019 and the borrower submits copies of its annual tax forms substantiating the revenue decline. Such a borrower may also demonstrate the required revenue reduction by demonstrating a revenue reduction in at least one quarter of 2019 compared to 2020.
• If a borrower was not in operation for all four quarters of 2019, then the borrower will analyze its revenue reduction only for those full quarters it was in operation in 2019.
• Definition of Gross Receipts.
  • The definition of gross receipts is as defined in 13 CFR §121.104.
  • For an eligible nonprofit organization, a veteran’s organization, an eligible nonprofit news organization, an eligible 501(c)(6) organization, or eligible destination marketing organization, gross receipts means gross receipts within the meaning of section 6033 of the Internal Revenue Code of 1986
•  Forgiveness of a First Draw PPP is not included in a borrower’s gross receipts.

Borrowers who are not self-employed, sole proprietorships, or independent contractors are also permitted to use the precise 1-year period before the date on which the loan is made to calculate payroll costs if they choose not to use 2019 or 2020. Note that the Second Rule provides specific calculations for seasonal borrowers, farmers, self-employed individuals, and partnerships.

Application

The form will be SBA Form 2483-SD. You can view that here.