It’s taken some time and required additional guidance from the Small Business Administration, but businesses can finally apply for a second draw from the Paycheck Protection Program (PPP).

The second draw was first announced as part of the Consolidated Appropriations Act, 2021 that became law in late-December. Although there had been some confusion about the law’s PPP program and how it would impact companies, the SBA released two Interim Final Rules (IFR) in early January to give companies and financial institutions information on how the program will operate and who will qualify.

Read on to learn more about those IFRs and how you can take advantage of the second draw PPP.


PPP loans are available now. Lenders are accepting applications from eligible companies and will continue to do so through March 31, 2021.

Eligibility Requirements

Borrowers may only qualify for a second draw PPP loan up to $2 million (down from $10 million on the first PPP). Additionally, the new program provides for stricter regulations on who may — and may not — qualify.

Here’s a brief rundown:

Qualifying Companies Must:

  • Have used, or plan to use, all of their first PPP loan disbursements by the time they receive their second PPP loan disbursement;
  • Employ 300 or fewer employees;
  • Demonstrate a 25% drop in gross receipts in any 2020 quarter compared to the same period in 2019. They may also demonstrate a 25% drop in gross receipts for all of 2020 compared to 2019. Gross receipts do not include first draw PPP loans they may have taken.

Qualifying Companies Must Not:

  • Operate a political organization or lobbying firm;
  • Have been formed in China or Hong Kong, or have any China-based owner with 20% or more ownership in the company;
  • Have permanently closed (temporary closures still qualify);
  • Have received a grant under the Economic Aid Act;
  • Have shares that are publicly traded.

Calculating Your PPP Loan

Again, second draw PPP loans are limited to less than $2 million. And generally, the loan amount is calculated by multiplying the company’s average monthly payroll by 2.5, up to the $2 million limit.

Borrowers may use either 2019 or 2020 payroll to calculate their loan amount. Additionally, the law requires employees to subtract compensation paid to employees who make more than $100,000.

Borrowers with NAICS code 72, which includes restaurants and hotels, are allowed to multiply their monthly payroll by 3.5. But again, they’re capped at $2 million per loan.

Required Documentation

Once companies are clear on the program and how much they may qualify for in second draw PPP loans, they’ll need to find a lender and provide required documentation.

All companies must submit SBA Form 2483-SD with their applications. Lenders may provide the application, but borrowers can also access it here.

All loan documentation used in a first draw PPP loan can be reused to determine eligibility amount. If borrowers are using a different lender or haven’t submitted for a PPP loan yet, they’ll need to provide Form 941 and state quarterly wage reporting forms for the year in which payroll will be calculated (2019 or 2020). Partnerships must also provide Form 1065 K-1s.

Self-employed individuals who qualify for a second draw PPP must also provide a copy of their Schedule C for the year in which they’re documenting payroll.

Loan Terms

Interest Rate: 1%

Loan Maturity: 5 years

Collateral Required? No

Personal Guarantees Required? No

A Note on Loans Above and Below $150,000

Regardless of the amount of a company’s PPP loan, it will need to provide proof of a 25% reduction in gross receipts. However, companies that receive loans above $150,000 are required to provide that documentation at the time of their application. Companies with loans less than $150,000 must show the 25% drop in gross receipts at the time of their loan forgiveness application.

Qualifying for Loan Forgiveness

Once companies have received their loans and used their funds, they may apply for forgiveness. The SBA has provided clear guidance on what will, and will not, qualify for loan forgiveness.

For instance, 60% of all PPP funds must be used for payroll costs, including employee compensation, retirement costs and payroll taxes. The Covered Period in which that evaluation is made can be any period of time between 8 weeks and 24 weeks.

Talk to a Perlson Expert Today

Still have questions about the PPP? Want to understand how it impacts your financial and tax picture? Be sure to reach out to a Perlson professional today at 516-541-0022.

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