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Jan. 16, 2021, 1:25 p.m. EST

How to apply for the second round of PPP loans for small businesses

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Kelsey Sheehy

This article is reprinted by permission from

Small businesses hit hardest by the coronavirus pandemic can soon receive a second forgivable loan under the newly revived  Paycheck Protection Program . Congress designated $137 billion for “second-draw” loans as part of a  larger funding and relief package . The bill, signed into law on Dec. 27, includes a total of $284.5 billion for PPP loans.

Businesses that need help beyond their initial loan will be able to apply for a second loan, provided they can show substantial revenue decline and meet other requirements detailed below. The SBA has not yet provided an exact date for when the program will reopen, but it will close on March 31, 2021. Business owners who plan to apply for a second PPP loan should gather the necessary information as soon as possible.

Learn more: ‘New and improved’ PPP loans help small businesses hard hit by COVID-19 — but there’s a deadline to get the money

In an attempt to give priority to underserved businesses, including minority-, women- and veteran-owned businesses, only loan applications from  community financial institutions  will be accepted for the first two days when the PPP loan portal initially reopens.

Here’s everything we know now about second-draw PPP loans.

If you or your business received an initial PPP loan, you may qualify for a second round of funding, provided you meet the following requirements:

Second-draw PPP loans are available to businesses, certain nonprofits, self-employed individuals, independent contractors, sole proprietors, housing cooperatives, small agricultural cooperatives, veterans’ organizations and tribal businesses.

More: Latest round of PPP funding targets mom-and-pop businesses

Businesses that receive a Save Our Stages grant cannot receive additional PPP loans.

The formula for second-draw PPP loans is similar to that of initial loans: Borrowers can receive up to 2.5 times their average monthly payroll costs. Average monthly payroll costs can be calculated using one of the following:

Seasonal businesses (typically operating for less than seven months in a calendar year) and new businesses in operation on Feb. 15, 2020, but not open for a full 12 months, will use a separate formula to calculate average monthly payroll.

Hotels, restaurants and other accommodation and food service businesses can borrow up to 3.5 times their average monthly payroll costs.

Unlike initial loans, the maximum amount for second-draw PPP loans is just $2 million. First-time PPP loans max out at $10 million.

Second-draw funds are forgivable, provided they are spent on covered costs, including:

At least 60% of the total loan amount must be used on payroll expenses to qualify for full loan forgiveness.

To apply for a second-draw PPP loan, businesses will need to submit documents to verify payroll costs and revenue loss, such as tax forms or bank statements.

You can avoid some paperwork by using the same lender for first- and second-draw loans, provided you use payroll figures from calendar year 2019 when applying for the second loan. Check with your lender to see if it is planning to offer second-draw loans.

Borrowers seeking $150,000 or less don’t need to prove revenue loss when they apply for a second-draw loan but will need to do so to apply for loan forgiveness.

Second-draw loan funds can be forgiven if they are used on covered costs within 8 to 24 weeks of receiving your loan. The exact time frame is determined when you apply for your loan. At least 60% of the total second-draw loan must be used on payroll expenses to qualify for full loan forgiveness. Up to 40% can be used on other covered expenses detailed above.

Related: A cruel winter: New York City restaurants struggle for survival amid second indoor dining ban

Business owners who borrow $150,000 or less can submit a one-page certification that details the following:

Business owners who borrow more than $150,000 will complete the same forgiveness process required for their first PPP loan. If you fall into that category, you’ll need documentation to show how the money was spent. This could include:

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Kelsey Sheehy writes for NerdWallet. Email: ksheehy@nerdwallet.com.

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