After several months of sleepless nights for many small business owners, more economic relief is on the way. Congress has allocated $285 billion for more Paycheck Protection Program (PPP) loans.

The PPP loan reboot includes provisions to help those that are struggling the most—even the smallest of small businesses. And there’s an added benefit: if you already received a PPP loan in 2020, you can qualify for a Second Draw on your PPP loan in 2021.

To qualify for a PPP loan, your business needs to meet the following criteria:

• Your business was in operation as of February 15, 2020.
• You have 500 or fewer employees. 
• You’re an independent contractor, sole proprietor, self-employed individual, or business partner (though only one PPP application can be submitted per partnership).
• You have employees for whom you paid salaries and payroll taxes are reported on Form 1099-MISC. (Although you cannot include 1099 payments in payroll calculations.) This also applies for paid independent contractors. 
• You are a small business concern as defined by the SBA.

And certify that: 

• Economic uncertainty makes your loan request necessary.
• You will use the funds to retain workers, maintain payroll, and/or make payments on mortgages, leases, and utilities.
• You do not have a current PPP loan or EIDL application for the same purpose (over the same period).
• From February 15, 2020–December 31, 2020, you did not receive a PPP loan or EIDL for the same purpose (over the same period).

This time around, the SBA has increased eligibility for PPP loans. Some business types that were excluded from previous rounds of PPP are now eligible to receive funding. These include: 

• News organizations
• Some hospitals owned by government entities
• Businesses that receive legal gaming revenue
• Electric, telephone, and housing cooperatives
• 501(c)(6) organizations and 501(c)(19) tax-exempt veterans organizations
• Tribal businesses
• Destination marketing organizations (if they meet applicable requirements)
• Certain faith-based organizations

There’s also a provision that may provide more relief for struggling restaurants: If you’re an accommodation or food service business that falls under a NAICS starting with “72” and has 500 or fewer employees per physical location, each location can apply for a PPP loan.

If the funds from your initial PPP loan weren’t enough to help you overcome the challenges brought on by the COVID-19 pandemic, you may be able to get a Second Draw.

Here’s the criteria you need to meet to qualify for a Second Draw:

• Your business has fewer than 300 employees
• You can show a 25% revenue reduction during any quarter of 2020 relative to the same quarter in 2019, or if you were in business for only the third or fourth quarter of 2019, you can show a reduction in revenue when compared against any quarter in 2020

If you own a restaurant, hotel, or live venue that falls under a NAICS code starting with “72,” you can apply for 3.5 times your monthly payroll costs for your Second Draw.

PPP Loan Maximums

$2 million is the maximum amount you can receive for a Second Draw. Also, the aggregate total amount any borrower can receive from a First Draw and Second Draw PPP loan is $10 million. The aggregate total amount that businesses within a corporate group can receive is $20 million.

PPP loans are intended to help small businesses maintain payrolls and continue necessary payroll-related payments like rent and utilities. The full allowable uses of the loan are:

• Payroll costs: 
  • Compensation in the form of salaries, wages, commissions or similar compensation up to $100,000
  • Payment of cash tips or equivalent
  • Payment for vacation, parental, family, medical, or sick leave
  • Allowance for dismissal or separation
  • Payment of retirement benefits
  • Group vision, dental, disability, or life insurance
  • Payment of state or local taxes assessed on the compensation of employees
• Healthcare costs related to the continuation of group healthcare benefits during periods of sick, medical, or family leave, as well as insurance premiums.
• Mortgage interest payments (but not prepayment or payment of the mortgage principal)
• Rent
• Utilities
• Interest on any other debt obligations incurred before February 15, 2020
• Refinancing an SBA EIDL received between January 31, 2020 and April 3, 2020
• Covered expenditures such as business software or cloud computing services that facilitate:
  • business operations
  • product or service delivery
  • the processing, payment or tracking or payroll expenses, human resources, sales, and billing functions
  • accounting or tracking of supplies, inventory, records, or expenses
• Covered property damage costs
• Covered supplier costs
• Covered worker protection expenditures

The PPP reboot is designed to help businesses that are struggling the most right now. Here are some of the notable provisions:

• If you own a restaurant, hotel, or live venue that falls under a NAICS code starting with “72,” you can apply for 3.5 times your monthly payroll costs for your Second Draw.
• If you own a live event or production company that was forced to close, you may be eligible for a special grant.
• If you’re a BIPOC business owner, you’ll have access to $12 billion that has been specifically set aside for underserved businesses.

The Paycheck Protections Program has been extended through May 31, 2021. It is possible that funds will run out prior to the May 31, 2021, deadline unless Congress approves additional funding. The latest extension has come with additional provisions to allow for SBA processing time. As long as an application has been submitted to the SBA by the May 31, 2021, deadline, the SBA will have through June 30, 2021, to process applications. 

Given that lenders need processing time before your application is submitted to the SBA, we recommend that you apply early to ensure your application makes it to the SBA in time for the new May 31, 2021, deadline. 

A Paycheck Protection Program (PPP) loan is a potentially-forgivable government-backed loan designed to help small businesses and nonprofits that have experienced business disruptions due to the COVID-19 pandemic. Eligible borrowers can qualify for up to 2.5 times their monthly payroll costs. PPP loans can be used to pay for payroll and other pandemic-related expenses, and eligible expenses incurred/paid for during the 24-week period following receipt of loan funds may be eligible for loan forgiveness. 

PPP loans are calculated based on 2.5 times your business’s (or organization’s) monthly payroll costs. If you own a restaurant, hotel, or live venue that falls under a NAICS code starting with “72,” you can apply for 3.5 times your monthly payroll costs for your Second Draw.

Payroll costs include compensation, as outlined above, along with other payroll-related costs like retirement payments, state and local taxes on payroll, payment for vacation or paid leave, group healthcare costs, and allowances for separation or dismissal. 

For a comprehensive outline of what is used and excluded, you can visit our PPP loan estimator, where you can also get an estimate on your potential PPP loan size.

To qualify for a PPP loan, you must certify that your business has sustained economic injury due to the COVID-19 pandemic. This certification is required to ensure that funds are distributed to small businesses that have been hit the hardest by business disruptions due to the pandemic.

Yes, you can qualify for a PPP loan even if you already have other loans, including other SBA loans. However, you cannot use the funds from PPP loans and other loans for duplicate use at the same time. For example, if you use a disaster loan (EIDL or loan advance) to pay your business’s rent in February, you cannot also apply for a PPP loan to cover February rent.

Applications will remain open until March 31, 2021—or until funds are exhausted. The program was reopened in January 2021 through an extension of the PPP Flexibility Act (PPPFA). 

The PPP Flexibility Act, signed into law on June 5, 2020, has provided previous expansions to the program aimed at increasing flexibility for borrowers. In the past, Congress used the PPP Flexibility Act to:

• Provide borrowers with 24 weeks to spend loan funds and qualify for forgiveness, an extension from the original 8 weeks. 
• Reduce the amount borrowers had to spend on payroll costs from 75% to 60%. 
• Provide exceptions that allowed borrowers to qualify for forgiveness even without fully maintaining/restoring their workforce (in some cases). 
• Update forgiveness applications to simplify the process for borrowers. 
• Extend the loan term from 2 years to 5 years.

If you received a PPP loan previously, you may be eligible to receive another round of funding—equal to or greater than the funds you received in your original loan (depending on your business type). This is referred to as a “Second Draw” on your PPP loan. 

The SBA makes a distinction that this is not a separate loan but an additional draw on your loan. You must use your SBA loan number from the First Draw when you apply for your Second Draw.

Who can qualify for a Second Draw? You can qualify for your second round of PPP funds if you:

• Have 300 or fewer employees
• Previously received a PPP loan (and have used all funds or plan to use all funds)
• Experienced a revenue reduction of 25% or greater due to the pandemic

How much can you get with a Second Draw on your PPP loan? Eligible businesses can qualify for the exact same amount that you did in your First Draw (in this respect, it is like a second PPP loan). That means most qualifying businesses can receive up to 2.5 times their monthly payroll costs. Businesses with a NAICS code beginning in “72” may qualify for up to 3.5 times their monthly payroll costs. This provision was included to allow the hardest-hit businesses to secure even more funds the second time around. 

For full details on how PPP Second Draws work, please visit the PPP Second Draw Page.

Once a borrower receives a Preferred Lender Program (PLP) number for their loan, the loan is approved by the SBA, and funds are reserved for the borrower. Starting on the date a borrower receives a PLP number, the lender has 10 calendar days to disburse funds. The loan must be disbursed in full, and the 24-week loan forgiveness period begins the day funds are disbursed.

If a lender cannot disburse funds due to delays from a borrower, like missing paperwork, the lender has 20 days to disburse funds. If they haven’t received the necessary information from the borrower by the end of that 20-day period, the loan will be canceled. If loan funds are designated for the refinancing of an Economic Injury and Disaster Loan (EIDL), the funds will be deducted from the disbursement amount and paid directly to the SBA by the lender.

For portions of the loan that are not forgiven, payments are deferred for the first 10 months. But keep in mind that interest will accrue during the 10-month deferral period.

PPP loans are eligible to be forgiven, up to 100% of the loan principal if the funds are used appropriately. And here’s a perk: the SBA is releasing a simplified application for businesses who received loans under $150,000, which will make it even easier to apply for PPP loan forgiveness.

Here’s what you need to know about what qualifies, how to apply, and how to calculate your potential PPP loan forgiveness.

Costs and Payments Eligible for Forgiveness

Any costs incurred and payments made during the 24-week period beginning on the date the loan is disbursed may be eligible for forgiveness.

• Payroll costs (as listed above)
• Mortgage interest payments (but not prepayment or payment of the mortgage principal)
• Payments on covered rent or utility obligations

Calculating Your PPP Loan Forgiveness Amount

Note that the forgiveness amount may not exceed the principal amount of your PPP loan. The amount of the loan that may be forgiven may be reduced proportionally if you have laid off employees or reduced wages.

Due to the SBA anticipating a high number of borrowers requesting PPP loan forgiveness, it is anticipated that no more than 40% of forgiven amount may be for non-payroll costs.

Check out our PPP loan forgiveness page for more details about forgiveness calculations.

Yes, your PPP expenses will now be tax-deductible. We expect the IRS to release further guidance on this and we’ll provide more detail once they do.