President Trump’s signing of the Coronavirus Response and Relief Supplemental Appropriations Act of 2021 reopens the PPP with $285B in additional funding. “PPP2” funds are available to businesses which did not receive previous PPP funds, subject to the terms of the initial PPP program. Additionally, businesses which previously received PPP funds are eligible for a second draw.
Second draw funds are available to eligible businesses, certain non-profits, housing cooperatives, news organizations, 501(c)(6) organizations, sole proprietors, self-employed workers and independent contractors with the following caveats:
Second Draw Borrower Requirements:
- Borrower must have 300 employees or fewer per location;
- Borrower has used or will use the full amount of its first PPP loan; and
- Borrower demonstrates at least a 25% percent reduction in gross receipts in the first, second, or third quarter of 2020 when compared to the same corresponding 2019 quarter.
Eligible borrowers can only receive one primary and one secondary PPP loan. However, unlike the original PPP loan, Economic Injury Disaster Loan (“EIDL”) recipients can also receive second draw funds.
Second Draw Loan Terms:
- The second loan cannot be greater than $2 million.
- Second draw borrowers may receive one PPP second draw loan not to exceed 2.5 times their average monthly payroll costs in the one year prior to the loan or the calendar year.
- Food service and accommodation industry borrowers (hotels, restaurants, and businesses classified under the North American Industry Classification System (NAICS) beginning with the number 72) are eligible for loans not to exceed 3.5 times their average monthly payroll.
- Lender terms are the same as the original PPP loan.
Second Draw Loan Forgiveness:
Like the PPP1 program, second draw recipients are eligible for loan forgiveness equal to the sum of payroll costs and certain non-payroll expenses, including mortgage, rent and utilities. However, the PPP2 expands the list of forgivable non-payroll costs to include:
- Costs for worker protection expenditures (including PPE and adaptive investments) that assist the borrower with COVID-19 health and safety guideline compliance during the covered loan period (either the 8 or 24 week election);
- Costs for software, cloud computing, human resources, and accounting needs;
- Costs not covered by insurance due to property damage caused by public disturbances during 2020; and
- Supplier costs which are essential to the borrower’s operations; for example, a restaurant’s purchase of perishable goods.
The 60/40 cost allocation between payroll and non-payroll costs continues to apply, as well as other forgiveness and safe harbor requirements in the original PPP.
The PPP2 officially opens when the U.S. Small Business Association establishes its PPP2 regulations, which it must do by no later than on January 6, 2021. The program closes March 31, 2021.