Second PPP Loan

UPDATE April 16, 2020: The SBA announced they are no longer accepting applications for the Paycheck Protection Program (PPP) loans due to funding limits being reached. See PPP loan updatesfor a timeline of milestone changes.

A second draw PPP loan was added on January 13, 2020 with a maximum value of $2 million. The loans also feature forgiveness in which all or a portion of the loan can be forgiven if the business keeps employee counts and wages consistent. This is the closest thing to free money, and even if there is a portion of the loan that remains unforgiven, only a one percent interest rate is applied to the remaining balance.

Can I Get a Second PPP Loan?

Most small businesses or nonprofit organizations are potentially eligible to receive a PPP loan if the organization employs 300 employees or fewer (versus the initial requirement of 500 or fewer). This was to encourage businesses that needed it most to get the relief in funding.

PPP First Draw vs. Second Draw

Although the second draw loans resemble the first draw loans with the original terms and conditions, there are several distinct differences between the two loans. The second draw loan contains narrower eligibility requirements than the first draw to ensure the right businesses received funds.

Watch a quick 15 minute video to gain more insight into the differences.

Want to display this infographic on your site? Copy and paste the following code. Be sure to include attribution to armanino.com with this graphic.

<h3> First vs Second Draw PPP Loan Infographic </h3> <p><a rel="noopener noreferrer" href='https://www.armanino.com/articles/second-ppp-loan/ ' target="’_blank’"><img src='https://www.armanino.com/-/media/images/articles/first-vs-second-loan-comparison-infographic.png' alt='First vs Second Draw PPP Loan Infographic' width="’600px’" border='0' /></a></p>

PPP Second Draw Requirements

Second draw loans were similar in requirements to first draw loans with a few differences. The specific for second draw loan requirements are outlined below:

• First PPP loan used
• Business operational before February 15, 2020
• Business is still open
• No more than 300 employees (if multiple, 300 per location)
• Show a 25% or greater reduction in gross revenue
• Not been primarily engaged in political or lobbying activities
• Not have been organized in, be at least 20% owned by an entity domiciled in, or have a member of its Board of Directors who is a resident of China or Hong Kong
• Not be publicly traded

PPP Second Draw Loan Calculations

For a second draw loan, the basis for calculating the PPP loan amount is 2.5 times the average monthly payroll costs (see below for Payroll Costs defined) incurred or paid during 2019 or the 12 months prior to the loan date.

The most common calculation steps and formula is outlined below (covering S and C corporations). Refer to the sba.gov site for specific steps and calculations for your specific business type.

Step 1

Compute 2019 payroll costs by adding the following:

1. 2019 gross wages and tips paid to your employees whose principal place of residence is in the United States, up to $100,000 per employee, which can be computed using:
   • 2019 IRS Form 941 Taxable Medicare wages & tips (line 5c-column 1) from each quarter,
   • Plus any pre-tax employee contributions for health insurance or other fringe benefits excluded from Taxable Medicare wages & tips,
   • Minus (i) any amounts paid to any individual employee in excess of $100,000, and (ii) any amounts paid to any employee whose principal place of residence is outside the United States;
2. 2019 employer group health, life, disability, vision, and dental insurance contributions (portion of IRS Form 1120 line 24 or IRS Form 1120-S line 18 attributable to those contributions);¹
3. 2019 employer retirement contributions (IRS Form 1120 line 23 or IRS Form 1120-S line 17); and
4. 2019 employer state and local taxes assessed on employee compensation, primarily state unemployment insurance tax (from state quarterly wage reporting forms).

Step 2

Calculate the average monthly payroll costs (divide the amount from Step 1 by 12).

Step 3

Multiply the average monthly payroll costs from Step 2 by 2.5

Step 4

Add the outstanding amount of any EIDL made between January 31, 2020 and April 3, 2020 that you seek to refinance. Do not include the amount of any advance under an EIDL COVID-19 loan (because it does not have to be repaid).

¹ Note that employer contributions for group health, life, disability, vision, and dental insurance for S-Corporation employees who own more than a 2 percent stake in the business (or employees who are family members of such owners) are not included in this figure as such contributions are already included in gross wages.

Alternately, you can try using this calculator to estimate your loan amount eligibility:

PPP Second Draw Forgiveness

To qualify for full PPP loan forgiveness on second draw loans during the 8- to 24-week period following loan disbursement ALL requirements below must be met:

• Employee and compensation levels are maintained in the same way as the first draw loan
• The loan proceeds are spent on payroll and other PPP eligible expenses
• At least 60% of the proceeds are spent on payroll

A portion of the loan is forgivable if the following conditions are met:

• Your business has been substantially impacted by COVID-19. Issues would include supply chain disruptions (quantity and lead time, quality, technology), staffing challenges, decrease in sales/customers and/or closures.
• Your 7(a) loan is granted from February 15, 2020 to June 30, 2020

The total of the following costs incurred, and payments made during the covered period can be forgiven:

• Payroll
• Payment of interest on any covered mortgage obligation
• Any payment on any covered rent obligation
• Any covered utility payment

Learn how to prepare for loan forgiveness in this video which digs into the known and unknown variables and takes a deeper look into the qualifications for forgiveness.