As business owners and lenders prepare to participate in the Second Draw of the Paycheck Protection Program, the following overview regarding terms and eligibility may be helpful:
PPP Second Draw Loan Details: For Borrowers
What are the terms of a Second Draw PPP loan?
- Loan amount: Up to 2.5x of the business’s average monthly payroll costs to be capped at $2 million dollars. Accommodation and food services businesses (NAICS codes starting with 72) can borrow up to 3.5x.
- Interest rate: 1%, fixed
- Term: 5 (five) years; payments are not made until loan forgiveness is determined
- Fees: None
- Loan forgiveness: If business owners comply with forgiveness rules, all or some of their loan can be forgiven
- Collateral: Not required
The Second Draw Program is similar to the first round of PPP in terms of what funds may be used for, though some additions have been made. Eligible uses for funding include:
- Employee payroll, salary and wages
- Interest on loans and mortgages
- Payment for any cloud computing, software and other accounting and HR needs.
- Property damage costs that are not covered by insurance and that are due to public disturbances that occurred during 2020
- Supplier payments pursuant to a purchase order, contract or order for goods that were in effect prior to receiving the PPP loan that are essential to their operations when the payments were made. Supplier costs for perishable goods can be made before or during the life of the loan.
- Any costs that borrowers incurred to help their business comply with Federal, State, or local requirements beginning on March 1, 2020.
- Personal Protective Equipment (PPE) purchases
PPP Second Draw Loan Details: For Lenders
How can you determine whether your clients are eligible for the Second Draw of PPP?
- Business owners received a first PPP loan
- Businesses must have used the full amount of their first PPP loan for authorized uses by the expected date of disbursement of their second draw PPP loan.
- Businesses must have 300 or fewer employees. If they are an employer in accommodation or food services (NAICS code starting with 72), they may have 300 employees at each of their business’s physical locations.
- Businesses must be able to demonstrate a revenue reduction of 25% or greater in 2020 relative to 2019. This is calculated by comparing the businesses quarterly gross receipts for one quarter in 2020 with gross receipts for the corresponding quarter of 2019 (i.e. Q3).
- Businesses cannot be permanently closed. If your client’s business has temporarily closed or suspended, they are still eligible.
- Eligible business types include: for-profit businesses, certain non-profits, independent contractors, sole proprietors, tribal businesses, and small agricultural coops.
Ready to start your PPP Second Draw application? It’s never been easier than with Loan Mantra! Upload your profile on the Loan Mantra portal today.