Applying for a Second Draw PPP Loan – Key Requirements

If you are interested in applying for Second Draw PPP Loans, or will be a first-time borrower, please take a look at the key requirements below. While these requirements are listed from one bank, they follow the requirements as stated by the SBA and Treasury, as other lenders will.

Key requirements for all applicants:

  • You are an authorized representative who can borrow on behalf of the business.
  • You have an active Business Checking account with your Bank.
  • Must have been in business as of February 15, 2020 and your business hasn’t been permanently closed.
  • If applying as a franchise, you will need to enter the SBA Franchise Identifier Code at the time of application. You can find that code at sba.gov/sba-franchise-directory. If your franchise isn’t on the directory, please contact your local SBA District Office to help you get it added.
  • You should review the requirements and guidance provided by the SBA for complete information regarding the PPP. The SBA continues to release updated guidance. For the most updated PPP rules, requirements and other information, visit SBA.gov and Treasury.gov. You may also want to contact your accountant, attorney or other trusted advisors.

PPP Overview: first and second-time borrowers

First-time borrowers (including affiliates) in general:

  • Can have no more than 500 employees (or fewer or more for certain business types for certain SBA size standards)
  • Accommodations and Food Services companies with NAICS code 72 can have no more than 500 employees per physical location  
  • The loan can be up to 2.5 times the business’ average monthly payroll costs, up to a $10 million loan maximum (or $20 million for a corporate group)

Second-time borrowers (including affiliates) in general:

  • Can have no more than 300 employees
  • Accommodations and Food Services companies with NAICS code 72 can have no more than 300 employees per physical location
  • The second loan can be up to 2.5 times the business’ average monthly payroll costs, up to a $2 million loan maximum (or $4 million for a corporate group)
  • Accommodations and Food Services companies with NAICS code 72 can borrow up to 3.5 times the business’ average monthly payroll costs, up to a $2 million loan maximum
  • The business must have experienced a revenue reduction of 25% or greater in 2020 relative to 2019. In general, a borrower may calculate this revenue reduction by comparing quarterly gross receipts for one quarter in 2020 with the gross receipts for the same quarter in 2019. A business that does not file quarterly or was not in operation for all four quarters of 2019 may still qualify; see the SBA guidelines for details. 
  • Used or will use the full amount of the first PPP loan for authorized purposes on or before the expected date of disbursement of the second PPP

Loan Documents you will need when applying (For both first and second-time borrowers):

If you file IRS Form 1040 Schedule C or 1040 Schedule F:

You must upload all of the following: 

  • 2019 or 2020* (whichever you used to calculate loan amount) Form 1040 Schedule C or Form 1040 Schedule F

Have no employees:

  • 2019 or 2020* (whichever you used to calculate loan amount) IRS Form 1099-MISC detailing nonemployee compensation received (box 7), if applicable
  • 2019 or 2020* (whichever you used to calculate loan amount) invoice, bank statement or book of record that establishes you are self-employed. [if 1099 not provided]
  • A 2020 invoice, bank statement or book of record to establish you were in operation on or around February 15, 2020.

Have employees:

  • 2019 or 2020* (whichever you used to calculate loan amount) Form 941 (or other tax forms or equivalent payroll processor records containing similar information)
  • State quarterly wage unemployment insurance tax reporting forms from each quarter in 2019 or 2020* (whichever you used to calculate loan amount) or equivalent payroll processor records
  • A payroll statement or similar documentation from the pay period that covered February 15, 2020 must be provided to establish you were in operation on February 15, 2020.

If you file IRS Form 1065 (Partnership):

You must upload all of the following:

  • 2019 or 2020* (whichever you used to calculate loan amount) IRS Form 1065 (including K-1s) and other relevant supporting documentation if the partnership has employees
  • 2019 or 2020* (whichever you used to calculate loan amount) IRS Form 941 State quarterly wage unemployment insurance tax reporting form from each quarter (or equivalent payroll processor records or IRS Wage and Tax Statements)
  • Records of any retirement or health insurance contributions
  • If the partnership has employees, a payroll statement or similar documentation from the pay period that covered February 15, 2020 must be provided to establish the partnership was in operation and had employees on that date.
  • If the partnership has no employees, an invoice, bank statement or book of record establishing the partnership was in operation on February 15, 2020 must instead be provided

If you file IRS Form 1120-S (S-Corp) or Form 1120 (C-Corp):

You must upload all of the following:

  • 2019 or 2020* (whichever you used to calculate loan amount) IRS Wage and Tax Statements (such as IRS Form 940, IRS Form W-3, or IRS Form W-2s) or equivalent payroll processor records or IRS Form 941 and state quarterly wage unemployment insurance tax reporting form from each quarter
  • 2019 or 2020* (whichever you used to calculate loan amount.) IRS Form 1120, IRS 1120-S
  • Records of any retirement or health insurance contributions
  • 2020 Q1 IRS Form 941, a payroll statement or similar documentation from the pay period that covered February 15, 2020 to establish you were in operation and had employees on that date

If you file IRS Form 990 (Non-profit):

You must upload all of the following:

  • 2019 or 2020 (whichever you used to calculate loan amount) IRS Wage and Tax Statements (such as IRS Form 940, IRS Form W-3, or IRS Form W-2s) or equivalent payroll processor records or IRS Form 941 and state quarterly wage unemployment insurance tax reporting form from each quarter
  • 2019 or 2020* (whichever you used to calculate loan amount) IRS Form 990 Part IX or other documentation of any retirement and health insurance contributions, if applicable
  • 2020 Q1 IRS Form-941, a payroll statement or similar documentation from the pay period that covered February 15, 2020 to establish you were in operation and had employees on that date

Second-time borrowers only:

  • Documentation that shows the business experienced a revenue reduction of 25% or greater in 2020 relative to 2019.

IMPORTANT NOTE: For loan requests of $150,000 or less, you won’t have to provide documentation when you apply for the loan, but you will have to provide documentation when you request Forgiveness.

– If your first PPP loan was NOT through the same bank you are currently applying for the second loan, have the information available:
SBA loan #
First PPP loan amount
*If using 2020 to calculate loan amount, this is required regardless of whether you have filed a 2020 tax return with the IRS.


Source:

https://business.chase.com/business-PPP-loan?jp_cmp=bb/101393/ema/EGSBAED011921/Body_Textlink_1%201/7#key-requirements

PPP Second Draw Application Forms and Information

The Journal of Accountancy’s senior editor Jeff Drew, has published an summary of the recent changes to the PPP Loan in light of the recent Acts that add funds to allow for a second round of loans. The applications are now open to all, both previous borrowers (please see below for details) and new borrowers as well. The final day to apply for and receive the Second Draw Loan is March 31, 2021.    Please see the abridged article below. Downloadable forms from the SBA will be located below the article.

The forms are Form 2483 – Paycheck Protection Program Borrower Application Form and Form 2483-SD – PPP Second Draw Borrower Application Form. Form 2483 is updated from previous iterations that started with the original PPP program. Form 2483-SD is a new form for qualified PPP borrowers to seek a second draw of a forgivable loan as they try to navigate economic seas churning in the throes of the COVID-19 pandemic.

The SBA and Treasury also published top-line summaries of the first-draw and second-draw PPP loans and a pair of procedural notices.

Congress revived the PPP as part of the $900 billion COVID-19 relief bill that was signed into law on Dec. 27. The original PPP provided $525 billion in forgivable loans over five months before it stopped accepting applications in August. The new PPP has $284.5 billion available, including $35 billion for first-time loans and $15 billion set aside for community financial institutions.

Quick overview of PPP borrower application forms

The PPP borrower application forms released Friday contain instructions on how to calculate payroll costs consistent with the guidance provided on Wednesday. In general, first- and second-time PPP borrowers may receive a loan amount of up to 2.5 times their average monthly payroll costs (with a cap per employee of $100,000 annualized) in 2019, 2020, or the year prior to the loan. PPP borrowers with North American Industry Classification System (NAICS) codes starting with 72 (such as hotels and restaurants) can receive up to 3.5 times their average monthly payroll costs on second-draw loans.

The forms also outline adjustments to the calculations for seasonal businesses, new businesses, farmers and ranchers, and partnerships.

The maximum loan amount is $10 million for first-time borrowers and $2 million for second-time PPP borrowers.

PPP borrowers can have their first- and second-draw loans forgiven if the funds are used on the following eligible costs: payroll, rent, covered mortgage interest, and utilities, covered worker protection and facility modification expenditures, covered property damage costs, covered payments to suppliers and payments for business software or cloud computing services that facilitate business operations, product or service delivery, and a number of back-office functions, including accounting.

To be eligible for full loan forgiveness, PPP borrowers must spend no less than 60% of the funds on payroll over a covered period of their choice between eight and 24 weeks.

First time PPP loans are available to borrowers that were in operations on Feb. 15, 2020 and are from one of the following groups:

  • Businesses with 500 or fewer employees that are eligible for other SBA 7(a) loans.
  • Sole proprietors, independent contractors, and eligible self-employed individuals.
  • Not-for-profits, including churches.
  • Accommodation and food services operations with NAICS codes starting with 72 that have fewer than 500 employees per physical location.
  • Sec. 501(c)(6) business leagues, such as chambers of commerce, visitors’ bureaus, etc., and “destination marketing organizations” that have 300 or fewer employees and do not receive more than 15% of receipts from lobbying. The lobbying activities must comprise no more than 15% of the organization’s total activities and have cost no more than $1 million during the most recent tax year that ended prior to Feb. 15. 2020. Sports leagues are not eligible.
  • News organizations that are majority-owned or controlled by an NAICS code 511110 or 5151 business or not-for-profit public broadcasting entities with a trade or business under NAICS code 511110 or 5151. The size limit for this category is no more than 500 employees per location.

Borrowers are eligible for a second-draw PPP loan of up to $2 million, provided they have:

  • 300 or fewer employees.
  • Used or will use the full amount of their first PPP loan on or before the expected date for the second PPP loan to be disbursed to the borrower. The IFR also clarifies that the borrower must have spent the full amount of the first PPP loan on eligible expenses.
  • Experienced a revenue reduction of 25% or more in all or part of 2020 compared with all or part of 2019. This is calculated by comparing gross receipts in any 2020 quarter with an applicable quarter in 2019, or, in a provision added in the IFR, a borrower that was in operation for all four quarters of 2019 can submit copies of its annual tax forms that show a reduction in annual receipts of 25% or greater in 2020 compared with 2019.

PPP Borrower Application Form – First Time Borrower
PPP Borrower Application Form – Second Time Borrower

The AICPA’s Paycheck Protection Program Resources page houses resources and tools produced by the AICPA to help address the economic impact of the coronavirus.

For more news and reporting on the coronavirus and how CPAs can handle challenges related to the outbreak, visit the JofA’s coronavirus resources page or subscribe to our email alerts for breaking PPP news.

Sources:

https://www.journalofaccountancy.com/news/2021/jan/ppp-application-forms-released.html

https://www.sba.gov/document/sba-form-2483-sd-ppp-second-draw-borrower-application-form

https://www.sba.gov/document/sba-form-2483-ppp-first-draw-borrower-application-form

https://www.jdsupra.com/legalnews/economic-aid-act-10-things-to-know-5901027/#:~:text=1.,for%20Second%20Draw%20PPP%20Loans.

New PPP Guidance for PPP Second Draw Loans

The Journal of Accountancy has published an in-depth summary of the new PPP guidance issued by the US SBA and Treasury.  Written by senior editor Jeff Drew, the article below details the main differences between the PPP 1 and the PPP 2 along with listing eligibility, eligible costs, notes on forgiveness, maximum amounts, and set-asides for  “new and smaller borrowers, for borrowers in low- and moderate-income communities, and for community and smaller lenders”.  Please see the article below.

New PPP guidance issued by SBA, Treasury

The U.S. Small Business Administration (SBA) and Treasury issued guidance Wednesday night for the reconstituted Paycheck Protection Program (PPP).

The guidance included two interim final rules (IFRs).

  • The 82-page IFR (https://home.treasury.gov/system/files/136/PPP-IFR-Paycheck-Protection-Program-as-Amended-by-Economic-Aid-Act.pdf) “Business Loan Program Temporary Changes; Paycheck Protection Program as Amended” consolidates the rules for PPP forgivable loans for first-time borrowers and outlines changes made by the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, P.L. 116-260.
  • The 42-page IFR (https://home.treasury.gov/system/files/136/PPP-IFR-Second-Draw-Loans.pdf) “Business Loan Program Temporary Changes; Paycheck Protection Program Second Draw Loans” lays out the guidelines for new PPP loans to businesses that previously received a PPP loan.

In addition, the SBA released a three-page (https://www.sba.gov/sites/default/files/2021-01/Guidance%20on%20Accessing%20Capital%20for%20Minority%20Underserved%20Veteran%20and%20Women%20Owned%20Business%20Concerns%20.pdf) “Guidance on Accessing Capital for Minority, Underserved, Veteran and Women-Owned Business Concerns.” That guidance includes a commitment from the SBA to make at least the first two days of the PPP application window open exclusively to applications from community financial institutions that serve minority- and women-owned businesses.

The SBA and Treasury announced Friday that the new PPP will re-open the week of Jan. 11 with community financial institutions exclusively allowed to make first-draw PPP loans on starting Jan. 11 and second-draw PPP loans starting Jan. 13. The PPP will open to all participating lenders at an unspecified date shortly thereafter and remain open through March 31.

Erik Asgeirsson, CEO of the AICPA’s business subsidiary, CPA.com, said Wednesday afternoon in an AICPA Town Hall that new forms for PPP are expected to be released this week and that the SBA could start receiving applications as early as Monday. Congress revived the PPP as part of the $900 billion COVID-19 relief bill (https://docs.house.gov/billsthisweek/20201221/BILLS-116HR133SA-RCP-116-68.pdf) that was signed into law on Dec. 27. The original PPP provided $525 billion in forgivable loans (https://www.sba.gov/sites/default/files/2020-08/PPP_Report%20-%202020-08-10-508.pdf) over five months before it stopped accepting applications in August. The new PPP has $284.5 billion available, including $35 billion for first-time loans.

The Economic Aid Act rebooted the PPP with many of the same parameters as the first program but also several important differences from the original PPP.

Second-draw PPP loans

One of the biggest changes with the new PPP is that Congress made funding available to businesses that had previously received a PPP loan. Borrowers are eligible for a second-draw PPP loan of up to $2 million, provided they have:

  • 300 or fewer employees.
  • Used or will use the full amount of their first PPP loan on or before the expected date for the second PPP loan to be disbursed to the borrower. The IFR also clarifies that the borrower must have spent the full amount of the first PPP loan on eligible expenses.
  • Experienced a revenue reduction of 25% or more in all or part of 2020 compared with all or part of 2019. This is calculated by comparing gross receipts in any 2020 quarter with an applicable quarter in 2019, or, in a provision added in the IFR, a borrower that was in operation for all four quarters of 2019 can submit copies of its annual tax forms that show a reduction in annual receipts of 25% or greater in 2020 compared with 2019.

The Economic Aid Act did not provide a general definition of gross receipts for determining a borrower’s revenue reduction, so the new guidance makes the definition consistent with the definition of receipts in 13 C.F.R. Section 121.104 of SBA’s size regulations. Specifically, the IFR defines gross receipts to include all revenue in whatever form received or accrued (in accordance with the entity’s accounting method) from whatever source, including from the sales of products or services, interest, dividends, rents, royalties, fees, or commissions, reduced by returns and allowances. Forgiven first-draw PPP loans are not included in the 2020 gross receipts.

First-draw PPP loans

The Economic Aid Act makes first-draw PPP loans available to borrowers that were in operation on Feb. 15, 2020, and come from one of the following groups:

  • Businesses with 500 or fewer employees that are eligible for other SBA 7(a) loans.
  • Sole proprietors, independent contractors, and eligible self-employed individuals.
  • Not-for-profits, including churches.
  • Accommodation and food services operations (those with North American Industry Classification System (NAICS) codes starting with 72) with fewer than 500 employees per physical location.
  • Sec. 501(c)(6) business leagues, such as chambers of commerce, visitors’ bureaus, etc., and “destination marketing organizations” that have 300 or fewer employees and do not receive more than 15% of receipts from lobbying. The lobbying activities must comprise no more than 15% of the organization’s total activities and have cost no more than $1 million during the most recent tax year that ended prior to Feb. 15. 2020. Sports leagues are not eligible.
  • News organizations that are majority-owned or controlled by an NAICS code 511110 or 5151 business or not-for-profit public broadcasting entities with a trade or business under NAICS code 511110 or 5151. The size limit for this category is no more than 500 employees per location.

In a change from the original PPP, publicly traded companies and businesses controlled, either directly or indirectly, by the president, vice president, head of executive departments, and members of Congress (or their spouses as defined by applicable common law) are not eligible for PPP loans.

PPP applicants must submit documentation sufficient to establish eligibility and to demonstrate the qualifying payroll amount, which may include, as applicable, payroll records; payroll tax filings; Form 1099-MISC, Miscellaneous Income; Form 1040, Schedule C, Profit or Loss From Business, or Schedule F, Profit or Loss From Farming; income and expenses from a sole proprietorship; or bank records.

PPP loan maximum amounts

In general, first- and second-time PPP borrowers may receive a loan amount of up to 2.5 times their average monthly payroll costs (with a cap per employee of $100,000 annualized) in 2019, 2020, or the year prior to the loan. PPP borrowers with NAICS codes starting with 72 (such as hotels and restaurants) can receive up to 3.5 times their average monthly payroll costs on second-draw loans.

The maximum for a first-draw PPP loan is $10 million, the same as in the original PPP. Applicants must provide a Form 941, Employer’s Quarterly Federal Tax Return, (or other forms with similar information) and state quarterly wage unemployment insurance tax reporting forms from each quarter in 2019 or 2020 (whichever is used to calculate the loan amount), or equivalent payroll processor records, along with evidence of any retirement and health insurance contributions.

Eligible costs

PPP borrowers can have their first- and second-draw loans forgiven if the funds are used on eligible costs. As with the first round of the PPP, the costs eligible for loan forgiveness in the revised PPP include payroll, rent, covered mortgage interest, and utilities. In addition, the following costs are now eligible:

  • Covered worker protection and facility modification expenditures, including personal protective equipment, to comply with COVID-19 federal health and safety guidelines.
  • Covered property damage costs related to property damage and vandalism or looting due to public disturbances in 2020 that were not covered by insurance or other compensation.
  • Expenditures to suppliers that are essential at the time of purchase to the recipient’s current operations.
  • Covered operating expenditures, which refer to payments for any business software or cloud computing service that facilitates business operations; product or service delivery; the processing, payment, or tracking of payroll expenses; human resources; sales and billing functions; or accounting or tracking of supplies, inventory, records, and expenses.

To be eligible for full loan forgiveness, PPP borrowers will have to spend no less than 60% of the funds on payroll over a covered period between eight or 24 weeks.

Simplified forgiveness

Borrowers that receive a PPP loan of $150,000 or less shall receive forgiveness if the borrower signs and submits to the lender a certification that is not more than one page in length, includes a description of the number of employees the borrower was able to retain because of the loan, the estimated total amount of the loan spent on payroll costs, and the total loan amount. The SBA has yet to create the simplified application form but must do so by Jan. 20. The form may not require additional materials unless necessary to substantiate revenue loss requirements or satisfy relevant statutory or regulatory requirements. Borrowers are required to retain relevant records related to employment for four years and other records for three years, as the SBA may review and audit these loans to check for fraud.

Minority, underserved, veteran, and women-owned businesses

The Economic Aid Act provided set-asides for new and smaller borrowers, for borrowers in low- and moderate-income communities, and for community and smaller lenders.

The set-asides include:

  • $15 billion across first- and second-draw PPP loans for lending by community financial institutions;
  • $15 billion across first- and second-draw PPP loans for lending by insured depository institutions, credit unions, and Farm Credit System institutions with consolidated assets of less than $10 billion;
  • $35 billion for new first-draw PPP borrowers; and
  • $15 billion and $25 billion for first-draw and second-draw PPP loans, respectively, for borrowers with a maximum of 10 employees or for loans of less than $250,000 to borrowers in low- or moderate-income neighborhoods. The SBA has determined that at least 25% of each of those set-asides will go to each one of the groups: loans to borrowers with a maximum of 10 employees and loans of less than $250,000 to borrowers in low- or moderate-income neighborhoods.

The SBA announced in its three-page guidance that it would take a number of steps to ensure increased access to the PPP for minority, underserved, veteran, and women owned business concerns. Most notably, the SBA said it will accept PPP loan applications only from community financial institutions for at least the first two days when the PPP loan portal reopens. In addition, the SBA said it would:

  • Direct Lender Match borrower inquiries to small lenders that can aid traditionally underserved communities;
  • Match small businesses through Lender Match with Certified Development Companies (CDCs), Farm Credit System lenders, microloan intermediaries, and traditional smaller asset size lenders;
  • Continue setting aside dedicated hours to process and assist the smallest PPP lenders with their PPP loans;
  • Continue to strongly encourage community development financial institutions and minority-, women-, veteran-, and military-owned lenders to apply to become PPP lenders. SBA said it would give full and prompt consideration to these applications to become PPP lenders consistent with program guidelines, including in cases where the lender does not meet all of the requirements listed on the updated SBA Form 3507;
  • Continue to work with the Board of Governors of the Federal Reserve System on the PPP Liquidity Facility to enable PPP lenders, including nonbank lenders, to pledge PPP loans to the Federal Reserve as collateral for Federal Reserve borrowings to enhance lender liquidity and enable PPP lenders to expand their lending capacity;
  • Promote awareness of these policies and procedures via traditional media methods, SBA social media accounts, and guidance to lenders before the formal opening of the SBA’s loan systems; 
  • Continue to work with federal partners. including the Department of Agriculture, the Federal Reserve, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Farm Credit Administration, and the National Credit Union Administration, to share the guidance with PPP lenders, borrowers, and the broader public.

The AICPA’s Paycheck Protection Program Resources page (https://future.aicpa.org/resources/toolkit/paycheck-protection-program-resources-for-cpas) houses resources and tools produced by the AICPA to help address the economic impact of the coronavirus.

For more news and reporting on the coronavirus and how CPAs can handle challenges related to the pandemic, visit the JofA’s coronavirus resources page:

(https://www.journalofaccountancy.com/info/coronavirus-resources-for-cpas.html) or subscribe to our email alerts (https://www.journalofaccountancy.com/info/news-emailform.html) for breaking PPP news.

Source:

https://www.journalofaccountancy.com/news/2021/jan/sba-treasury-issue-ppp2-guidance.html

Business Loan Program Temporary Changes to the PPP Second Draw Loans

The Consolidated Appropriations Act was signed into law on December 27th, 2020. This act follows the CARES Act that was signed into law last March. It aims to provide additional funding and relief to small businesses affected by the pandemic. Part of this Act includes the “Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Economic Aid Act)”, allowing a second round of loans available through the Paycheck Protection Program by adding additional funding. The current changes made to the original PPP Loan are found in Section 311, with the Small Business Administration and Treasury releasing guidance on this temporary section in early January. 

To download the SBA’s Interim Final Law Concerning Section 311 of the Economic Aid Act, please click on the button below. 


Temporary Changes to the PPP Second Draw Loans

Please note, according to the guidance, 

“Under section 311, SBA may guarantee loans under the PPP Second Draw Program through March 31, 2021 (“Second Draw PPP Loans”) to borrowers that previously received a PPP loan under section 7(a)(36) of the Small Business Act (“First Draw PPP Loans”) and have used or will use the full amount of the initial PPP loan for authorized purposes on or before the expected date of disbursement of the Second Draw PPP Loan.”

Many of the same terms, conditions, and processes applicable to the “First Draw” or first set of PPP Loans, are applicable to this Second Draw. There are however, some differences. These differences are further explained in the post “New Guidance for Second Draw PPP Loans”. Some of these differences include (but are not limited to):

  • Date effective – the rule for Second Draw PPP Loans is effective immediately;
  • Applications are open and will close March 31, 2021;
  • Eligibility: A Second Draw PPP Loan Borrower can only be eligible if they have 300 or fewer employees, experienced a reduction in revenue during 2020 relative to 2019, received a First Draw PPP Loan and has exhausted or will exhaust all the funds from that loan on authorized purposes by or before the disbursement of the Second Draw PPP Loan funds. 
  • Businesses assigned with a NAICS code beginning with 72 are eligible if they employ at most 300 employees per physical location (and meets the revenue reduction requirement among other specified requirements). 

Source:

https://home.treasury.gov/system/files/136/PPP-IFR-Second-Draw-Loans.pdf