Should Your Small Business Apply For A Second PPP Loan Through the SBA?

The Paycheck Protection Program (PPP) Is Back With Options For More Businesses to Apply For a Second Draw of Funds

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If you think your small business qualifies for a second PPP loan, it’s possible that your application will be approved if your business is still operating with employees and functioning normally. If you haven’t heard the latest news from the SBA (Small Business Administration), the Paycheck Protection Program (PPP) is back with options for more businesses to apply for a second draw of funds. However, you will need to act fast because the application deadline is March 31, 2021, unless it is extended.

As of this writing, I recently learned that the $1.9 Trillion Stimulus Package narrowly passed today and the bill is expected to be signed into law this coming week. $48 billiion was included in the bill to increase small business funding. $25 billion to help restaurants, $15 billion for additional targeted EIDL grants, $1.25 billiion for venue operators, and $7.25 billion for additional PPP program funding. So, I think it’s beneficial to you to apply for the 2nd Draw PPP loan, if you think your small business really needs it. If your small business is part of the restaurant and hospitality industry, then you know it has been hit particularly hard.

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The government legislation is working hard to provide a greater helping hand to businesses that want to apply for a second PPP loan. Eligible businesses in the accommodations and food services sectors could receive up to 3.5 times its average monthly 2019 or 2020 payroll costs, up to $2 million. Moving forward, during March 2020 the CARES Act has undergone multiple iterations and clarifications. In an effort to define who can qualify for a PPP loan, including expanding the criteria for loan forgiveness.

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Since the inception of the PPP as part of the March 2020 CARES Act, the rules and eligibility qualifications surrounding the forgivable loan program have undergone multiple iterations and clarifications in an effort to expand the definition of who can qualify for a loan, as well as expanding the criteria for loan forgiveness. The SBA states that forgiveness on a second draw PPP loan will be based upon the following stipulations:

“Your business uses the money within an eight- to 24-week covered period following loan disbursement. You have a maximum of 300 employees (first draw loans are capped at a maximum of 500 employees). The loan is used for at least 60% of your payroll costs, and the number of employees on the payroll and their compensation levels remain the same during the covered period you’re using the money.

You can show your business has experienced at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020. You’re requesting no more than $2 million; the amount granted will be based on an applicant’s payroll. And, with the passage of the Coronavirus Response and Relief Supplemental Appropriations Act (CRRSAA) in December 2020, the IRS and Treasury that a forgiven PPP loan is not considered taxable income, eliminating concerns there could be a tax burden on those who took PPP funds.”

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Furthermore, on February 22, 2021, President Joe Biden and his administration abruptly changed crucial program rules to help the neediest small businesses. Which have sometimes struggled to obtain aid from the federal relief effort. What this means to many of you is this… The recent changes include a new way to calculate loans for self-employed people and a 14-day exclusive window for applications from small businesses with fewer than 20 employees. The last day to apply for the PPP loan program for the neediest small businesses and self-employed people is March 9, 2021 at 5 pm.

The adjustments are intended to increase aid to the very smallest businesses, many of which are run by women, Black people and members of other minority groups and have so far received a disproportionally small share of the relief money. After the exclusive window closes, all other businesses that applied for a PPP loan, the SBA will begin processing their applications in a timely manner. Keep in mind, you will need to repay a non-forgivable PPP loan within five years. You also have the option to pay your PPP loan off early without penalty. Or, you can defer starting repayment of your loan for up to 10 months after you received your funds.

Additionally, lenders are saying they don’t believe the PPP loan program will run out of money before the March cutoff time. This year through February 28th, the SBA had approved 2.2 million loans equaling more than $156 billion, just over half of the $284 billion the program had when it reopened in January.

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