Paycheck Protection Program Second Draw Loans: Overview
Summary
SBA overview of Paycheck Protection Program Second Draw Loans for eligible borrowers that previously received a PPP loan, on the same general terms as First Draw PPP loans. It lists eligible uses, including payroll costs and benefits, mortgage interest, rent, utilities, COVID-19 worker protection costs, uninsured property damage from looting or vandalism during 2020, and certain supplier and operations costs. The overview says loans qualify for full forgiveness if, during the 8- to 24-week covered period, employee and compensation levels are maintained, proceeds go to eligible expenses and at least 60 percent goes to payroll. Borrowers are generally eligible if they used their First Draw loan for authorized uses, have no more than 300 employees and show a revenue reduction.
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PAYCHECK PROTECTION PROGRAM SECOND DRAW LOANS
The Paycheck Protection Program (PPP) now allows certain eligible borrowers that previously
received a PPP loan to apply for a Second Draw PPP Loan with the same general loan terms as
their First Draw PPP Loan. Second Draw PPP Loans can be used to help fund payroll costs,
including benefits. Funds can also be used to pay for mortgage interest, rent, utilities, worker
protection costs related to COVID-19, uninsured property damage costs caused by looting or
vandalism during 2020, and certain supplier costs and expenses for operations.
Full Forgiveness Terms
Second Draw PPP Loans made to eligible borrowers qualify for full loan forgiveness if during
the 8- to 24-week covered period following loan disbursement:
• Employee and compensation levels are maintained in the same manner as required for the
First Draw PPP loan;
• The loan proceeds are spent on payroll costs and other eligible expenses; and
• At least 60 percent of the proceeds are spent on payroll costs.
Targeted Eligibility
A borrower is generally eligible for a Second Draw PPP Loan if the borrower:
• Previously received a First Draw PPP Loan and will or has used the full amount only for
authorized uses;
• Has no more than 300 employees; and
• Can demonstrate at least a 25% reduction in gross receipts between comparable quarters
in 2019 and 2020.
Maximum Loan Amount and
Increased Assistance for Accommodation and Food Services Businesses
For most borrowers, the maximum loan amount of a Second Draw PPP Loan is 2.5x average
monthly 2019 or 2020 payroll costs up to $2 million. For borrowers in the Accommodation and
Food Services sector (click HERE for NAICS 72 to confirm), the maximum loan amount for a
Second Draw PPP Loan is 3.5x average monthly 2019 or 2020 payroll costs up to $2 million.
How and When to Apply
Borrowers can apply for a Second Draw PPP Loan until March 31, 2021, through any existing
SBA 7(a) lender or through any federally insured depository institution, federally insured credit
union, eligible non-bank lender, or Farm Credit System institution that is participating in PPP.
All Second Draw PPP Loans will have the same terms regardless of lender or borrower. A list
of participating lenders as well as additional information and full terms can be found HERE.
Ensuring Access for All
SBA continues to call upon its lending partners, including Community Development Financial
Institutions (CDFIs) and Minority Depository Institutions (MDIs), to redouble their efforts to
assist eligible borrowers in underserved and disadvantaged communities. At least $25 billion is
being set aside for Second Draw PPP Loans to eligible borrowers with a maximum of 10
employees or for loans of $250,000 or less to eligible borrowers in low- or moderate-income
neighborhoods. To promote access for smaller lenders and their customers, SBA will initially
only accept Second Draw PPP Loan applications from community financial institutions starting
on January 13, 2021. The PPP will open to all participating lenders for Second Draw PPP
Loans shortly thereafter.
Visit www.sba.gov or www.treasury.gov for more information and details, including the
comprehensive program rules.
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