The Second Draw PPP Loan: The Latest News and Next Steps for Restaurants and Small Businesses

Restaurants and Small Businesses may now apply for a second PPP Loan beginning January 13, 2021, thanks to the latest COVID-19 pandemic relief bill approved in late December which authorizes up to $284.5 billion for eligible businesses.

With these additional loans, qualifying restaurants and small businesses can fund payroll costs (including benefits), and pay for mortgage interest, rent, utilities, worker protection costs related to COVID-19, uninsured property damage costs caused by looting or vandalism during 2020, and certain supplier costs and expenses for operations. (full details found in www.sba.gov).

Other key PPP updates listed in the U.S. Department of the Treasury website www.treasury.gov also state that:

  • PPP borrowers can set their PPP loan’s covered period to be any length between 8 and 24 weeks to best meet their business needs;
  • PPP loans will cover additional expenses, including operations expenditures, property damage costs, supplier costs, and worker protection expenditures;
  • The Program’s eligibility is expanded to include 501(c)(6)s, housing cooperatives, direct marketing organizations, among other types of organizations;
  • The PPP provides greater flexibility for seasonal employees

There will also be increased assistance for accommodation and food services businesses. The maximum loan amount for a Second Draw PPP Loan will be 3.5x average monthly 2019 or 2020 payroll costs up to $2 million, versus the 2.5x for other small businesses. You can confirm whether your business is in this category by visiting https://www.census.gov/eos/www/naics/

Here’s a roundup of resources and important information that you’ll need before you apply:

Who is Eligible?

According to the SBA, a borrower is generally eligible for a Second Draw PPP Loan if the borrower: 

How can you apply?

For those reapplying:

Borrowers will be able to apply for a Second Draw PPP Loan from January 13, 2021, until March 31, 2021, through any existing SBA 7(a) 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 PPP. All Second Draw PPP Loans will have the same terms regardless of lender or borrower. A list of participating lenders as well as additional information and full terms can be found here:

https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program

The application will require borrowers to submit documents that verify payroll costs and revenue loss. If the lender for the applicant’s Second Draw PPP Loan is the same as the lender that made the applicant’s First Draw PPP Loan this additional documentation is not required because the lender already has the relevant documentation supporting the borrower’s payroll costs.

For those who haven’t applied for a PPP loan before,

First-time borrowers can apply for a First Draw PPP Loan until March 31, 2021, using this form provided on the SBA website.

https://www.sba.gov/document/sba-form–paycheck-protection-program-borrower-application-form

For existing PPP borrowers that did not receive loan forgiveness by December 27, 2020, he or she may:

  • Reapply for a First Draw PPP Loan if they previously returned some or all of their First Draw PPP Loan funds, or
  • Under certain circumstances, request to modify their First Draw PPP Loan amount if they previously did not accept the full amount for which they are eligible

What about loan forgiveness?

Second Draw PPP Loans qualify for full loan forgiveness if the loan proceeds are spent on payroll costs and other eligible expenses; and at least 60% of the proceeds are spent on payroll costs. The 40% can be used on other covered expenses (non-payroll expenses), but the employee and compensation levels are maintained in the same manner as required for the First Draw PPP loan.

We recommend that you check out National Restaurant Association’s Article on PPP Second Draw for more details https://restaurant.org/downloads/pdfs/advocacy/ppp-jan2021-update

As well as these following resources:

Top-Line Overview of First Draw PPP Loans (Released 1/8/21)

Top-Line Overview of Second Draw PPP Loans (Released 1/8/21)

Accessing Capital for Minority Underserved, Veteran and Women-Owned Business Concerns Guidance (Released 1/6/21)

Interim Final Rule #1 – PPP as Amended by Economic Aid Act (Released 1/6/21)

Interim Final Rule #2 – PPP Second Draw Loans (Released 1/6/21)

Procedural Notice – Modifications to SBA Forms 3506, 3507 and 750 CA (PPP only) (Released 1/8/21)

Procedural Notice – SBA Procedural Notice on Repeal of EIDL Advance Deduction Requirement (Released 1/8/21)

Frequently Asked Questions for Lenders and Borrowers (12-09-20) https://www.sba.gov/document/support–faq-lenders-borrowers

How to Calculate Loan Amounts (06-26-20) https://www.sba.gov/document/support-how-calculate-ppp-loan-amounts

Updated First Draw Forms

Form 2483 – First Draw Borrower Application (Updated 1/8/21)

Form 2484 – First Draw Lender Guaranty Application (Updated 1/8/21)

Second Draw Forms

Form 2483-SD – Second Draw Borrower Application (Released 1/8/21)

Form 2484-SD – Second Draw Lender Guaranty Application (Released 1/8/21) https://www.sba.gov/document/sba-form-2484-sd-ppp-second-draw-lender-application-form?utm_medium=email&utm_source=govdelivery

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