How businesses can apply for a second PPP loan

[ad_1]

Sshopping mall businesses hardest hit by coronavirus pandemic may receive second forgivable loan under new stimulus Paycheque Protection Program. The application for “second draw” loans opens on January 13 for companies applying through a community financial institution. The SBA will accept applications from other lenders later in the week.

Congress has designated $ 137 billion for PPP second-draw loans under a more funding and a relief package. The bill, enacted on December 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 a substantial drop in income and meet the other requirements detailed below.

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

Who is eligible for second-draw PPP loans

If you or your business received a first PPP loan, you are eligible for a second round of financing, provided you meet the following conditions:

  • Have no more than 300 employees.
  • Have used or utilized the full amount of your first PPP loan.
  • May show a decrease of 25% or more in annual gross revenue or for any quarter of 2020, compared to the same quarter in 2019.
  • Have not closed permanently. Businesses that have temporarily closed or suspended their activities can benefit from a second draw loan.

Second Draw PPP Loans are available for businesses, some nonprofits, self-employed, independent contractors, sole proprietors, housing co-ops, small agricultural co-ops, veterans organizations, and businesses. tribal.

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

How much can you receive for a second PPP loan

The second-draw PPP loan formula is similar to that of the initial loan: borrowers can receive up to 2.5 times their average monthly salary costs. Average monthly salary costs can be calculated using any of the following:

  • The 12 months preceding the loan.
  • Calendar year 2019.
  • Calendar year 2020.

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

  • Seasonal businesses: Average total monthly payroll for any 12-week period between February 15, 2019 and February 15, 2020.
  • New companies: Total salary costs divided by the number of months these costs were paid.

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

Unlike initial loans, the maximum amount for second-draw PPP loans is only $ 2 million. The first PPP loans amount to a maximum of $ 10 million.

” MORE: Coronavirus relief for small businesses and the self-employed

How the money can be used

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

  • Salary costs, including paid sick leave and group insurance benefits provided by the employer.
  • Operating costs, including payments for mortgage, rent, utilities, software, human resources, and accounting needs.
  • Property damage suffered during protests and unrest in 2020, unless covered by insurance.
  • Payments to a supplier covering contracts and purchase orders in effect before taking out the second draw loan.
  • Personal protective equipment and modification made to meet health and safety requirements.

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

How to register

In order to apply for a second draw PPP loan, businesses will need to submit documents to verify salary costs and lost income, such as tax forms or bank statements.

You can avoid some paperwork by using the same lender for both the first and second drawdown loans, as long as you use the 2019 calendar year payroll figures when applying for the second loan. Check with your lender if they are considering offering second resort loans.

Borrowers looking for $ 150,000 or less do not need to prove loss of income when applying for a second draw loan, but will need to do so to request a loan forgiveness.

Loan remission

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

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

  1. The number of employees they retained thanks to the loan.
  2. An estimate of the share of the loan devoted to salary costs.
  3. The total amount of the loan.
  4. Proof of qualifying loss of income, if not already provided to the lender.

Business owners who borrow more than $ 150,000 will go through the same forgiveness process as required for their first P3 loan. If you fall into this category, you will need documents to show how the money was spent. This could include:

  • Salary costs and workforce: Tax forms, canceled checks, bank statements, payment receipts and third party payroll reports.
  • Operating costs: Receipts for business software, accounting services, utility payments, and rental, lease, or mortgage payments.
  • Supplier costs: Purchase orders, contracts and receipts for payments made to suppliers.
  • Other expenses covered: Proof of payment for health and safety modifications, such as sneeze guards, ventilation systems, enlarged outdoor space and equipment to perform a health examination; receipts for the purchase of face masks and other personal protective equipment.

More from NerdWallet

Kelsey Sheehy writes for NerdWallet. Email: [email protected].

The article How Businesses Can Apply for a Second PPP Loan originally appeared on NerdWallet.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

[ad_2]

About Nina Snider

Check Also

The intimate story with Matt Toms of Handelsbanken Wealth & Asset Management

[ad_1] They discuss how life and the markets are very intertwined. Toms joined Handelsbanken Wealth …