A second round of PPP loans was approved to provide additional assistance to individuals and businesses that have been financially impacted by the pandemic. It is currently available through March 31, 2021, and while generally the same terms and conditions as the first PPP apply, we have compiled a list of Frequently Asked Questions (FAQs) on the topic. 

On December 27, 2020, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (known as the Economic Aid Act; Pub. L. 116-260) was signed into law. The new legislation includes appropriations for new loans and advances to be administered by the United States Small Business Administration (SBA), including approximately $284 billion for a second round of PPP loans (PPP Second Draw Program or PPP Second Draw Loan). This second round of the program is available through March 31, 2021, under generally the same terms and conditions applicable to the first PPP program included in the CARES Act.  

In general, those terms are the following:  

  • No collateral will be required.
  • No personal guarantees will be required.
  • 1% interest rate.
  • The maturity is five years.
  • All loans will be processed by all lenders under delegated authority.
  • Lenders will be permitted to rely on certifications of the borrower to determine the borrower’s eligibility and use of loan proceeds.

here are some of the faqs regarding the second round of ppp funds, as issued by the sba:

Who can Apply for the Second Draw PPP Loan?

A borrower can generally benefit for the PPP Second Draw Program if:  

  • Previously received a PPP loan under the CARES Act and will or has used the full amount only for authorized uses on or before the Second Draw PPP Loan is disbursed;
  • Has no more than 300 employees. Different from the first PPP, which applied to employers with not more than 500 employees, this second round applies solely to employers with no more than 300 employees; and
  • Can demonstrate at least a 25% reduction in gross receipts  (revenue received or accrued from whatever source; including from the sales of products or services, interest, dividends, rents, royalties, fees or commissions ) between comparable quarters in 2019 and 2020.

The Interim Final Rule (IFR) provides that a borrower who was operating in all four quarters of 2019, is deemed to have experienced the required revenue reduction if it experienced a reduction in annual gross receipts of 25 % or greater in 2020, compared to 2019.

The Second Draw PPP loan is available for business that are still operating and will retain employees, which is the primary purpose of the PPP. However, a borrower that has temporarily closed or temporarily suspended its business will qualify for a Second Draw PPP Loan as long as it has plans on reopening.

What is the maximum loan amount for a Second Draw PPP Loan?

For most borrowers, the maximum PPP loan amount for the Second Draw PPP Loan is 2.5 times the average monthly payroll costs amount in 2019 or in 2020; up to $2 million. However, for borrowers in the food and accommodation industry (NAICS Sector 72), the maximum Second Draw PPP Loan amount is 3.5 times the monthly average payroll costs  in 2019 or in 2020; up to $2 million.

What expenses are allowed under the Second Draw PPP Loan?

Similar to the First Draw PPP Loan, the Second Draw PPP Loans can be used to help fund payroll costs, including costs for employee vacation, parental, family, medical, and sick leave benefits.  However, qualified sick and family leave wages for which a credit is allowed under the Families First Coronavirus Response Act is excluded. Funds can also be used to pay for mortgage interest, rent, utilities, worker protection costs related to COVID-19, among other operating expenses.  

How and When to Apply?

Borrowers can apply for a Second Draw PPP Loan until March 31, 2021, through any existing 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 the PPP program.

Which documents are needed to apply for the Second PPP Draw?

In general, you must complete the SBA PPP application, Form 2483-SD, and submit the application alongside the following documentation:

  • Evidence that your business was operating on February 15, 2020.
  • Payroll for 2019 or 2020.
  • Evidence of payroll costs:
  • For employers who pay payroll with withholding (one of the following documents from 2019 or 2020):
    • PR Treasury’s Form 499 R-3
    • IRS 940 Annual Form
    • IRS 941 Quarterly Return
  • For sole proprietor businesses, independent contractors, and self-employed (DBAs):
    • The 2019 or 2020 income tax return; and
    • Evidence of self-employment (i.e. PR Treasury’s Form 480.6SP for 2019 or 2020, invoices or bank statements)
  • Financial information that supports a reduction in gross revenue of at least 25% of 2019 to 2020, or their gross revenue in any quarter of 2020, in comparison with the same quarter of 2019.
  • 2019 and 2020 tax returns, quarterly financial statements, or bank statements.

What are the requirements to qualify for the Second Draw PPP Loan Forgiveness?

This second round of PPP loans qualifies for full loan forgiveness, if during the 8- to 24-week period following the 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 expense; and
  • At least 60 percent of the proceeds are spent on payroll costs.

Should you need additional information or guidance regarding the second round of PPP loans or other tax-related matters, please contact our tax advisors at 787-751-6164 or via email at [email protected].