A COVID-19 disaster relief program designed to give existing PPP borrowers additional funds
Many businesses have continued to be negatively impacted by COVID-19. Your clients need additional money to keep things afloat and pay their employees, but their first PPP loan has run dry. As a lender service provider (LSP), Prudent Lenders is here to help financial institutions like yours implement and manage the U.S. Small Business Administration loan programs.
The Second Draw Paycheck Protection Program is an SBA loan program launched to help small businesses stay afloat during ongoing COVID-19 related restrictions and closures. Like their first PPP loan, their second PPP loan can also be forgiven. We put together this Second Draw PPP Checklist as a quick and easy reference for you and your clients. Learn more about how a Second Draw PPP loan can benefit your clients.
PPP second draw loan details
- Loan amount: Up to 2.5x your client’s average monthly payroll costs up to $2 million. Accommodation and food services businesses (NAICS codes starting with 72) can borrow up to 3.5x.
- Interest rate: 1%, fixed
- Term: 5-years; payments are not made until loan forgiveness
- Fees: No fees
- Loan forgiveness: If business owners comply with forgiveness rules, all or some of their loan can be forgiven
- Collateral: Not required
Will I qualify for a second PPP loan?
Second Draw PPP loans are designed to help small businesses that continue to struggle with the impact of COVID-19. Here’s what to know about requirements for a Second Draw PPP loan:
- Business owners received a first PPP loan
- Businesses must have used the full amount of your first PPP loan for authorized uses by the expected date of disbursement of your second draw PPP loan.
- Businesses must have 300 or fewer employees. If they are an employer in accommodation or food services (NAICS code starting with 72), they may have 300 employees at each of your business’s physical locations.
- Businesses must be able to demonstrate a revenue reduction of 25% or greater in 2020 relative to 2019. This is calculated by comparing your quarterly gross receipts for one quarter in 2020 with your gross receipts for the corresponding quarter of 2019.
- Businesses cannot be permanently closed. If your client’s business has temporarily closed or suspended, they are eligible.
- Eligible business types include for-profit businesses, certain non-profits, independent contractors, sole proprietors, tribal businesses, and small agricultural coops.
How can your clients use their Second Draw PPP loan?
Second Draw PPP loans can be used for the same expenses as their first PPP loan, with some additions. These expenses include:
- Employee payroll, salary and wages
- Interest on loans and mortgages
- Payment for any cloud computing, software and other accounting and HR needs.
- Property damage costs that are not covered by insurance and that are due to public disturbances that occurred during 2020
- Supplier payments pursuant to a purchase order, contract or order for goods that were in effect prior to receiving the PPP loan that are essential to their operations when the payments were made. Supplier costs for perishable goods can be made before or during the life of the loan.
- Any costs that clients incurred to help their business comply with Federal, State, or local requirements beginning on March 1, 2020.
- Personal Protective Equipment (PPE) purchases
Need additional assistance?
Many states and municipalities are providing assistance programs for small businesses, and your clients should check with their local Chamber of Commerce to see what’s available in their area. For additional information, visit our Lender’s Guide to COVID-19-Related Loan Modifications.