2nd PPP Loan — Are You Eligible?
In order to be eligible for a PPP Second Round loan, a borrower must be “a business concern, nonprofit organization, housing cooperative, veterans organization, [t]ribal business concern, eligible self-employed individual, sole proprietor, independent contractor, or small agricultural cooperative” and be able to demonstrate the following:
- it has no more than 300 employees; and
- it has suffered a 25% or more reduction in gross revenues between comparable quarters in 2019 and 2020.
A borrower may either be a first time PPP borrower or have previously received a PPP loan. Importantly, on the Act’s face, it is unclear whether a borrower may avail itself of (a) the SBA’s alternative employee-based and revenue-based size standards corresponding to a borrower’s primary industry (i.e., the NAICS industry classification) or (b) the SBA’s alternative maximum tangible net worth and net income standards for purposes of determining its eligibility under the PPP Second Round.
In general, PPP borrowers may receive a loan amount of up to 2.5 times their average monthly payroll costs in the one year prior to the loan or the calendar year. No loan can be greater than $2 million.
Entities in industries assigned to NAICS code 72 (Accommodation and Food Services) may receive loans of up to 3.5 times their average monthly payroll costs. Such businesses with multiple locations that are eligible entities under the initial PPP requirements may employ not more than 300 employees per physical location. The waiver of affiliation rules that applied during initial PPP loans applies to these NAICS code 72 second loans; however, an eligible entity may only receive one PPP second draw loan.
For loans of not more than $150,000, the borrower entity may submit a certification attesting that it meets the revenue loss requirements on or before the date the entity submits its loan forgiveness application. Nonprofit and veterans organizations may use gross receipts to calculate their revenue loss standard.
Borrowers of a PPP second draw loan are eligible for loan forgiveness equal to the sum of their payroll costs, as well as covered mortgage, rent, and utility payments, covered operations expenditures, covered property damage costs, covered supplier costs, and covered worker protection expenditures incurred during the covered period. Borrowers are still required to use at least 60% of PPP loan proceeds on eligible payroll costs in order to receive full forgiveness.
The Act extends existing safe harbors on restoring FTE and salaries and wages.