A Second PPP Loan: A Guide for Business Owners

Oct 26, 2023 By Susan Kelly

The Paycheck Protection Program, which has been reactivated in response to the coronavirus pandemic, now offers a second forgivable loan to small firms that have been particularly hard hit.

All eligible borrowers were able to apply for "second-draw" loans on January 19. May 31, 2021, is the application deadline. As part of a bigger finance and relief package, Congress approved $137 billion for PPP second draw loans. For PPP loans totaling $284.5 billion, the bill was enacted into law on December 27.

What's New with The Second Round of Public Policy Polling?

Your first PPP loan might be available in 2021 if you don't get one in 2020. If your business suffers a revenue loss in 2020 after receiving a PPP loan 2020, you may be entitled to apply for a second PPP loan. Regardless of whether you accept your first or second PPP loan, the terms of these loans will be the same.

If you follow the forgiveness guidelines, the second round of PPP loans will likewise be forgiven in full, just like the first round. At least 60% of the loan must be used for payroll, with the remainder going toward other permissible business costs.

Who Can Get A Second PPP Loan?

Amidst the lingering consequences of the coronavirus pandemic, many firms are still struggling to make ends meet after receiving successive rounds of funding. Late last year, the Trump administration passed a new relief package. Loans for businesses that lost out on the program last year and those seeking a second round of funding were included in the new legislation.

Those looking for a second PPP loan should meet the following qualifications:

  • Already have or plan to use the full amount of your PPP loan for qualified expenses.
  • No more than 300 workers are permitted.
  • Had gross receipts fall by at least 25% between 2019 and 2020, similar quarters.
  • No more than $2 million was requested; the applicant's annual salary will determine the amount awarded.

This financing round has a different set of eligibility requirements than in the previous round. It's worth noting that the minimum employee count to be eligible for a second loan has been reduced from 500 to 300, meaning that even enterprises that have been accepted for a first draw are no longer eligible.

What's New This Time Around?

It's been a whirlwind of rule revisions and clarifications since the PPP was first announced in March 2020. The SBA and Treasury issued numerous adjustments, including the summer application deadline. As originally envisioned, the PPP program was meant to pay expenses for eight weeks, but the government eventually increased this to 24 weeks.

Forgiveness was previously limited to funds used for payroll. However, it was subsequently reduced to 60% of the amount awarded. For loan forgiveness reasons, today's borrowers can select any length of time between eight and 24 weeks.

Why You Should Apply for A Second PPP Loan

You can request a second cash drawer under the Paycheck Protection Program (PPP). PPP loans are now available to any small business, whether it's their first time applying for the program or having already received a loan from the government. The application deadline is March 31.

Kapiti COO Benjamin Johnston argues that as long as you meet the requirements for the second draw and are still in business with staff and typical operational expenses, it is highly beneficial to take the money.

1. Sectors Hit Hardest Have More Funding

Businesses that rely on masses of people can't regain their financial footing no matter how they pivot. Particularly heavily hit are the hospitality and restaurant sectors. New legislation has been introduced.

You can get up to 3.5 times your average monthly 2019 or 2020 payroll expenditures, up to $2 million, for any lodging and foodservice industries business that qualifies for a second draw.

2. To Make Loan Forgiveness Easier

The forgivable loan program's rules and eligibility requirements have undergone numerous modifications and clarifications since its beginning as part of the March 2020 CARES Act to broaden the definition of who can apply for a loan and expand the criteria for loan forgiveness.

3. Simplified Form for Forgiveness of Smaller PPP Loans

The two-page Form 3508S, which allows businesses that obtained PPP loans of $150,000 or less to self-certify that the funds were used for qualifying costs, was released by the IRS on January 19.

Smaller businesses may have found the thought of both qualifying for a PPP loan and completing the previous documentation requirements for forgiveness too daunting to attempt. There may be an audit of your debt up to four years after you've applied for forgiveness, and you may be requested to present proof of a drop in revenue.

4. The Loan is Still Low-Risk Even If You Don't Get Forgiven

You may not be eligible for full or partial forgiveness of your PPP loans, but it doesn't mean you can't apply for a PPP loan. "The favorable component to the interest rate is still 1 percent," says Brian Marks, an economics professor at the Pompea College of Business at the Connecticut University of New Haven.

You have five years to pay back a non-forgivable PPP loan. Pay it off early without penalty, or defer repayment for up to 10 months after receiving the funds.

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