Am I eligible for the new round of PPP?
Companies with 300 or fewer employees who suffered a 25% drop in any quarter’s revenue from 2019 to 2020 are eligible for the second round of PPP. This means a 25% or more reduction in gross income from any quarter in 2020 relative to that same quarter in 2019. Small businesses with less than 20 employees can now apply for a second round of PPP funding.
In the first round of PPP, companies with 500 or fewer employees were eligible.
Unlike the first round, new entity types are now eligible, including:
- Trade organizations
- Chambers of commerce
- Non-profits or government instrumentalities that engage in destination or tourism marketing with 300 or fewer employees
- Owners with non-fraud related felony convictions
- Owners who are delinquent on student loans
- Non-citizens who are U.S. residents, like Green Card or visa holders
As with the previous round, this round also includes:
- Non-profit organizations
- Housing cooperatives
- Veteran-run organizations
- Self-employed individuals
- Sole proprietors
- Independent contractors
- Seasonal businesses
This additional round of PPP also more clearly defines seasonal businesses for eligibility. Seasonal businesses that operate for no more than seven months out of the year or earned less than a third of its receipts in any six months of the previous year are eligible.
There are also ineligible businesses that include entities primarily engaged in political activities or lobbying, publicly traded companies, and entities partially controlled by members of Congress.
In the new PPP loan application, you’ll need to verify that you need the funds for business operations and that you haven’t permanently shut down. If you’ve already taken the first PPP loan, you’ll need to certify that you already have — or are planning to use — the initial PPP loan for eligible expenses before or on the date you get your second loan.
What if I didn’t get a PPP loan in the first round?
Previous PPP loan receivers and new applicants are both eligible for a second-round PPP loan.
However, if you previously received a loan, you must have been forgiven all or part of the first round PPP loan to reapply for the maximum amount of the second round. You must have used — or will use — the full amount of your first PPP as well as demonstrate a 25% reduction in gross receipts in 2020 relative to the same quarter in 2019.
How is the second round of PPP calculated?
If you haven’t taken out a PPP loan yet, then you may be eligible to take a first or initial draw. For first-time PPP borrowers, you can borrow whatever amount is lowest: 2.5 times your average cost for payroll or $10 million.
If you’re applying for a second round, you may be eligible for what’s called a second draw, which is whatever amount is lowest: $2 million or 2.5 times your average cost for payroll this year or the year before you took your PPP loan. If your business is categorized as code 72 by the NAICS, it’s 3.5 times your average payroll expenses.
The loan calculation formula was reworked in 2021 to allow independent contractors, sole proprietors, and self-employed individuals to receive more financial relief. There is also $1 billion earmarked for business owners without employees located in lower- and moderate-income areas.
Will this second PPP loan be forgiven in whole or partially?
The loans for the second round of PPP forgiveness are up to $2 million (as opposed to the maximum of $10 million in the first round), and you may choose either an eight-week or 24-week forgiveness period.
If a loan is less than $150,000, the loan amount shall be forgiven if the recipient signs and submits a certification to the lender.
Your loan forgiveness could be reduced based on the number of employees and salaries that fell more than 25%. Note that borrowers must retain relevant records related to employment for four years and other records for three years. For loans above $150,000, records will need to be retained for six years. In both cases, these records may be reviewed and audited for fraud later.
Borrowers can apply for forgiveness once all the loan proceeds have been used. At least 60% of the PPP loan must be used for payroll costs to be eligible for full forgiveness, just like the first round of PPP. If borrowers do not apply for forgiveness within 10 months after the last day of the covered period, PPP loan payments are no longer deferred.