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“Second draw” PPP loans

Under the new law, eligible small businesses can take out so-called “second draw” PPP loans. This provision targets smaller and harder-hit businesses with 300 or fewer employees that have used up, or have plans to use up, the full amount of their initial PPP loans. The maximum second-draw loan amount is $2 million. Only one second-draw loan can be taken out.

To be eligible, a business must demonstrate at least a 25% decline in gross receipts in the first, second or third quarter of 2020, compared to the corresponding 2019 quarter. For loan applications submitted after December 31, 2020, the business can use gross receipts for the fourth quarter of 2020, compared to gross receipts for the fourth quarter of 2019.

An eligible business can generally borrow up to 2.5 times its average monthly payroll costs in the year prior to the loan or in calendar year 2019. The limit is increased to 3.5 times payroll costs for businesses in the hard-hit accommodations and food service industries.

Important: The second round of the PPP, which includes the new second-draw opportunity, is funded with $284 billion. New loans can be made through March 31, 2021, or until the funding is exhausted.