Paycheck Protection Program (PPP) Second Draw

ATTENTION! The paycheck protection program (PPP) loan application period ended on May 31, 2021. If your business received a PPP loan and you’re seeking information on loan forgiveness, visit Lendio’s PPP Loan Forgiveness. YOU MAY STILL QUALIFY FOR THE EMPLOYEE RETENTION CREDIT. APPLY FOR THE ERC TODAY THROUGH LENDIO.

Access your second potentially-forgivable financial safety net with a Second Draw.

SBA Paycheck Protection Program (PPP) Loans
Begin your PPP loan application through Lendio to be matched with a PPP lender. Lendio is not a lender, and an application submitted through Lendio does not guarantee you will receive a PPP loan or be matched to a lender. We will accept applications throughout the program or until allocated funds for the program have been exhausted.

Low Interest Rate

1% fixed APR for the life of the loan

Payment Deferral

Payments deferred for 10 months

Loan Forgiveness

On all qualified business expenses

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PPP Second Draw: What It Is and How It Came to Be

PPP Second Draw allows borrowers who previously received a PPP loan to receive a second potentially-forgivable loan to be used toward payroll expenses, rent, utilities, and mortgage interest. For most borrowers, the loan can be for up to 2.5 times your monthly payroll expenses, giving you a lifetime total of 5 months worth of payroll expenses through the program. For especially impacted food service and accommodation businesses (businesses with a NAICS code starting in “72”), borrowers may be able to qualify for up to 3.5 times monthly payroll expenses.

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Qualifications for a PPP Second Draw

Wondering if you’ll qualify for a PPP Second Draw loan? You may be able to secure your second potentially-forgivable loan if you meet the following criteria.

You’re an Eligible Entity

To be eligible for a Second Draw from your PPP loan, you must first meet the SBA’s criteria of an eligible entity, meaning you qualify as a(n):

  • Small business
  • Independent contractor
  • Eligible self-employed individual
  • Sole proprietor
  • Nonprofit type that was eligible for a First Draw PPP loan
  • Veterans organization
  • Tribal business concern
  • Housing cooperative
  • Small agricultural cooperative
  • Eligible 501(c)(6) organization or destination marketing organization
  • Eligible nonprofit news organization

You Meet Additional Loan Criteria

  • Have previously received a First Draw PPP loan
  • Have 300 or fewer employees
  • Have used or will use the full amount of your First Draw PPP loan, and only used the loan on eligible expenses.
  • You must have experienced a reduction in revenue of 25% in 2020 compared to 2019
  • Must have been in operation on February 15, 2020

What Documentation Will You Need to Apply for a Second Draw?

The documentation required to apply for a Second Draw is the same as what is required for the First Draw. You can find document requirements, outlined by entity type, outlined below.

To expedite your application process, we recommend collecting all necessary documentation before you begin the application.

To complete the application, you’ll need:

  • Full-color copy of government-issued ID for all owners with 20%+ share in the business.
  • Voided check from the payroll bank account of your business
  • January 2020 bank statement
  • February 2020 bank statement
  • 2019 or 2020 full tax return

Required for certain business types:

  • S-Corp, C-Corp, Partnerships choose one:
    • IRS Form 941
    • IRS Form 944
    • 2019 or 2020 Form W2 for all employees
  • Sole Proprietors, Eligible Self-Employed individuals, Independent Contractors:
    • IRS Form 1099-MISC
  • LLCs choose one:
    • IRS Form 941
    • IRS Form 944
    • 2019 or 2020 Form W2 for all employees
    • 1099-MISC for all contractors
  • Nonprofits, Veterans, and Tribal Organizations choose one:
    • IRS Form 941
    • 2019 or 2020 IRS Form 990 Part IX
    • IRS Form 944 (if 944 is selected, also ask for IRS 944 Written Permission)
    • 2019 or 2020 Form W2 for all employees

How to Apply for a Second Draw Loan

Apply now through Lendio to be paired with a lender. You may not have to submit additional documentation if you:

  • Applied through Lendio for your First Draw
  • Use the same lender as you used for your First Draw
  • Used 2019 dates to calculate your payroll expenses for the First Draw

If you apply for your Second Draw through a new lender during this round, your application process will look similar to the first round. While the specifics may vary depending on where you apply, here’s a general idea of what to expect:

  • Before you begin, you’ll want to gather all the required documentation for a PPP Second Draw
  • Locate your SBA loan number (also referred to as a PLP number) from your First Draw
  • Calculate your revenue reduction
  • Complete the application (step-by-step instructions here)
    • Confirm or enter your existing business information
    • Enter revenue reduction and provide documentation, if necessary
    • Confirm ownership
    • Confirm or enter identification documents
    • Confirm or enter payroll documents
    • Confirm or enter payroll documents
    • Confirm or enter additional documents (depending on your business entity type)
    • Sign your application (Don’t forget this step!)

You can apply for a PPP Second Draw through March 31, 2021, or until funds are exhausted—whichever comes first. This reboot to the program and the creation of PPP loans came as part of the most recent PPP Flexibility Act extension, which has been colloquially referred to as “the new round of PPP” or the “PPP second round.”

What Can You Use a PPP Second Draw For?

Changes have been made in the 2021 extension of PPP (sometimes referred to as the “PPP second round”) to broaden how the loan can be used. In addition to the creation of the PPP Second Draw, Congress also expanded the ways the loan funds can be used.

While you still need to spend 60% of the loan on payroll-related expenses, you can now also use your PPP Second Draw to cover:

  • Healthcare costs related to the continuation of group healthcare benefits, including insurance premiums
  • Rent
  • Utilities
  • Mortgage interest payments (payments toward a mortgage principal are not eligible for forgiveness)
  • Interest on any debt obligations incurred prior to February 15, 2020
  • Refinancing for an EIDL received from January 3, 2020, to April 3, 2020
  • Covered expenses like business software or cloud computing services that assist you in:
    • Business operations
    • Product or service delivery
    • The processing, payment, or tracking of payroll expended, human resources, sales, and billing functions
    • Accounting or tracking of supplies, inventory, records, or expenses
  • Covered property damage costs
  • Covered supplier costs

Eligible payroll expenses remain consistent with PPP First Draws and include:

  • Compensation like salaries, wages, commissions, tips, etc., up to $100,000/employee annually ($8,333/month).
  • Paid time off including vacation, parental, family, medical, or sick leave
  • Separation or dismissal allowances
  • Payments towards retirement benefits
  • Group vision, dental, disability, or life insurance
  • The payment of state or local taxes assessed on the compensation of employees

Second Draw Loan Forgiveness

Loan forgiveness guidance remains the same as guidance for forgiveness on First Draw Loans. Want more details? Find everything you need here.

Loan Terms & Rates

If your Second Draw is not approved for loan forgiveness, you will be required to repay the loan. Second Draws come with a 1% interest rate and a maximum of 5 years for the loan term.

Unresolved First Draw Loans

The SBA may review any PPP loan. If your First Draw PPP loan is under review by the SBA when you apply for a Second Draw, that application may be rejected. The SBA will try to expedite any reviews. You may be eligible to reapply once the review is complete.

How to Calculate Revenue Reduction

To qualify for a Second Draw, a borrower must have experienced an economic loss of 25%+ in revenue (measured by a 25%+ reduction in gross receipts when comparing 2020 to 2019). Borrowers who receive a Second Draw under $150k will not need to provide documentation at the time of application, although they may need to provide documentation when they apply for loan forgiveness. Borrowers who receive a Second Draw over $150k will need to provide documentation.

Whether or not you need to submit this information to the SBA, here are the allowed methods for calculating the 25%+ reduction in revenue:

  • A borrower must calculate revenue reduction by comparing gross quarterly receipts from one quarter in 2020 to the receipts from a corresponding quarter in 2019.
  • For borrowers in operation for all of 2019: A borrower can demonstrate 25%+ revenue reduction by comparing the annual receipts from 2020 to those of 2019. They may also calculate by comparing receipts from a single quarter in 2020 to that same quarter in 2020.
  • For borrowers not in operation for all 4 quarters of 2019: The borrower will compare its revenue for only the full quarters in 2019 that it was in operation.
    • If a borrower was only in operation for the third and fourth quarter in 2019, they can compare either of those quarters against any quarter from 2020.
    • If a borrower was only in business for the fourth quarter of 2019, they may compare that quarter against any quarter in 2020.
    • If a borrower was in operation by February 15, 2020, but not in business during 2019: They must have receipts in the second, third, and fourth quarters. The borrower is then allowed to compare the first quarter receipts to any other quarter in 2020.

Second Draw Loan Amount

Most businesses can qualify for 2.5 times their monthly payroll expenses, as was the case with the First Draw. Businesses with a NAICS code starting in “72” can qualify for a Second Draw loan up to 3.5 times their monthly payroll costs.

Businesses Prohibited from Receiving a Second Draw PPP Loan

Businesses that have not received a First Draw PPP loan will be unable to receive a Second Draw PPP loan. (Visit the Paycheck Protection Program (PPP) page to learn more about qualifying for a First Draw.)

Additional prohibitions include:

  • Businesses primarily involved in lobbying activities (including advocacy groups, entities organized for research, and think tanks)
  • Certain entities organized under the laws of the People’s Republic of China or Hong Kong or with ties to China or Hong Kong
  • Any individual required to register as a Foreign Agent under the Foreign Agents Registration Act
  • A business that received a Shuttered Venue Operators Grant
  • Entities where the president, vice president, head of an executive department, or member of Congress owns or controls 20% of the company (this also applies to entities with 20%+ ownership by a spouse of an individual within an aforementioned category)
  • Publicly traded companies
  • Borrowers who already received a PPP Second Draw Loan
  • Financial businesses primarily engaged in the business of lending (such as banks, finance companies)
  • Life insurance companies, but not independent agents
  • Businesses located in a foreign country
  • Pyramid schemes
  • Gambling
  • Private clubs
  • Government-owned entities (but not those owned or controlled by a Native American tribe)
  • SBA Loan packagers
  • Any business providing prurient sexual material (i.e., strip clubs)
  • Political or lobbying companies
  • Shuttered Operator Grant recipients
  • Those engaged in illegal activity
  • Household employers (an individual who employs a housekeeper or nanny)
  • 20% or more owner that has criminal issues, or prior default on government debt
  • Organizations currently in bankruptcy or who file for bankruptcy after submitting their PPP application
  • Businesses not in operation prior to February 15, 2020
  • Permanently closed businesses
  • Securities issuers
  • Businesses where a senior government official has a controlling interest
  • Hedge funds and private equity funds