On Dec. 27th, President Donald Trump signed a second stimulus bill approved by Congress. The bill extends the Paycheck Protection Program (PPP) with a Second Draw loan.

The loan targets smaller and harder-hit businesses who previously received a PPP Loan. The maximum loan amount is $2 million. In order to receive a PPP Second Draw loan, borrowers must:

–Employ 300 employees or less;

–Have used or will use the full amount of their first PPP; and

–Demonstrate at least a 25 percent reduction in gross receipts in the first, second or third quarter of 2020 relative to the same 2019 quarter. Applications submitted on or after January 1, 2021 are eligible to utilize the gross receipts from the fourth quarter of 2020.

Eligible entities may include businesses, certain non-profits, housing cooperatives, veteran’s organizations, tribal businesses, self-employed individuals, sole proprietors, independent contractors, and small agricultural cooperatives.

In general, loan amounts could be up to 2.5 times the average monthly payroll costs in the one year prior to the loan or calendar year. Businesses in the Accommodations and Food Services industries may receive loans up to 3.5 times the average monthly payroll.

The existing 60/40 cost allocations between payroll and qualified nonpayroll expenses will continue to apply to PPP Second Draw loans.

If your business did not obtain any funding through the initial PPP loan program, you would be applying under the first PPP program instead of the new Second Draw loans. There are some changes that will apply retroactively to the first PPP program as well.

The available Covered Periods for the PPP Second Draw loans will be identical to the options in the initial PPP program. You may choose between an 8 or 24 week Covered Period.

Loans of $150,000 and under should be seeing a simplified application and forgiveness process (including forgiveness under the initial PPP program).

If your loan is under $150,000 and you have submitted an application for forgiveness under the initial PPP program, please reach out to your banker to discuss how the simplified application process changes may benefit your business. If you have not applied for forgiveness already, it is recommended you hold off on formally applying until the SBA has layered in the new simplified process.

A new calculation for maximum loan amounts will be introduced for some farmers and ranchers who were in business as of February 15, 2020; operate as a sole proprietor, independent contractor or a self-employed individual; and who report income and expenses on a Schedule F.

The list of eligible expenses may include additional operations expenses related to HR and Accounting, certain property damage costs due to public disturbances, and supplier costs and expenses related to personal protective equipment. The list also clarifies the inclusion of employer-provided group insurance benefits as part of payroll costs.

We expect to see additional details from the SBA surrounding the administration and application process for both PPP Second Draw loans as well as existing loans in the coming days. If you are interested in additional funding through a Second Draw loan, please reach out to your banker.