What You Need to Know To Qualify for A Second PPP Loan

Finally, the Paycheck Protection Program (PPP) is back. The program and funds will be available until March 31, 2021, or until funds have been exhausted (whichever comes first). After burning through $523 billion in government-backed loans last year, Congress has restarted the program with $284 billion in new funding.

“A second round of PPP could not have come at a better time, and the SBA is making every effort to ensure small businesses have the emergency financial support they need to continuing weathering this time of uncertainty,” said SBA Administrator Jovita Carranza.

However, this time around, there are a few changes that’ll impact eligibility and loan sizes.

Curious if you qualify, and if so, for how much? Like all things with the government, the details are in the fine print. Let’s take a look at PPP 2.0.

What’s Changed for PPP 2.0?

If your business didn’t receive a PPP loan last year, you’re eligible to apply for a first draw PPP loan now. And even if you did receive a PPP loan in 2020, there’s a chance you’re eligible for a second draw.

In general, your business will have to meet the following criteria to be eligible for a first draw loan:

• Have 500 employees or less
• To have been in operation on or before February 15, 2020

In general, your business will have to meet the following criteria to be eligible for a second draw loan:

• Have 300 employees or less
• Proof that you’ve experienced “a revenue reduction of 25% or greater in 2020 relative to 2019”
• To have been in operation on February 15, 2020
• To have used (or plan to use) the full amount of your existing loan before the Second Draw PPP Loan’s expected fund disbursement date

These new loans (whether it’s your first draw or second draw) have the same terms as the original PPP loan:

• 250% of your average monthly payroll (350% for eligible second draw loans if your business’ NAICS code begins with 72)
• Potential for full forgiveness
• 1% interest rate on non-forgivable loans
• Terms generally run for 5 years
• No fees
• No collateral or guarantees required
• Loan payments are deferred

When Can You Start Applying?

Select lenders and borrowers could start making loans starting January 11 (to minority- and women-owned businesses that were underserved last time around). Small lenders ($1 billion or less in assets) will be able to submit applications starting January 15, and general applications will be available beginning January 19.

PPP funds are limited and will be disbursed until March 31, 2021, or until funds have been exhausted—whichever comes first. As we saw in 2020, these funds will go quickly, and a flood of applications will overburden most lenders (especially the big banks). Fortunately, Congress allocated additional funding last year to satisfy all applicants, but the delay meant many businesses had to wait around longer for funding.

However, the Treasury Department believes this $284 billion will be enough to fund all qualified applicants. Still, you’re probably better off applying sooner rather than later. Get your application in as soon as possible.

What Are the Loan Limits?

First-time loans are capped at 2.5 times your average monthly payroll costs, with a maximum $10 million limit.

Second PPP loans use the same 2.5 times calculation, but they’re capped at $2 million. However, hard-hit industries (such as accommodation and food services) can borrow up to 3.5 times their average monthly payroll costs.

Give our Paycheck Protection Program Loan Calculator a try to see how much money you may qualify for.

What Can You Use These Funds for?

Last year’s PPP loans were limited to payroll costs, rent, and utility expenses. PPP 2.0 loans have expanded the list of eligible expenses to include operations expenditures, property damage costs, supplier costs, personal protective equipment, and utilities.

• Payroll: Payroll costs include salary, wages, commissions, bonuses, and tips. Also, the new bill clarifies that group insurance benefits like group life, dental insurance, disability, and vision, are considered payroll costs.
• Rent: Rent payments for buildings, vehicles, and equipment that have lease dates starting before February 15, 2020.
• Interest payments: Interest payments on mortgage obligations that were in effect before February 15, 2020.
• Utility payments: Includes electricity, water, gas, transportation, telephone, and internet service for any agreements made before February 15, 2020.
• Operations expenditures: Payments for any software, cloud computing, or other human resources and accounting needs—including remote-enabling services like Zoom, Slack, and more.
• Property damage costs: Costs for any damages done due to the public disturbances in 2020 that weren’t covered by your insurance.
• Supplier costs: Expenses made to a supplier prior to obtaining a PPP loan that are (or were) essential for your ongoing operations.
• Worker protection expenditures: Costs for personal protective equipment and adaptive investments to help your business comply with evolving federal health and safety guidelines.

However, keep in mind that you’ll need to spend a certain percentage of your loan on payroll to qualify for loan forgiveness. Here’s what you need to know.

Are These Loans Forgivable, Too?

Yes.

To qualify for loan forgiveness, you’ll need to spend at least 60% of your loan on payroll costs, meaning no more than 40% of your loan can be spent on other eligible expenses.

Forgivable expenses must be made in the 8 to 24 weeks covered period after your PPP loan has been disbursed (up until March 31, 2021).

You’ll apply for loan forgiveness with the lender that issued your loan—not the SBA. Your lender should send you follow-up information regarding further instructions about forgiveness and how to apply. In the meantime, follow this PPP loan checklist to ensure you’re in good shape for forgiveness.

Where Can You Find a Lender?

If you already got a PPP loan last time around, the best place to go is to your original lender. You’ll need to provide some updated documentation, but they’ll likely be able to expedite your application if you’ve already been funded through them.

If that’s not an option, or you want to switch your lender, you can also apply for a PPP loan with Funding Circle.

If you received your first PPP loan through Funding Circle, here’s what your 2nd application looks like:

1. Sign in to your existing account, confirm a few details, submit additional documents, and submit your streamlined application.
2. Your dedicated Account Manager will reach out to you shortly to review your application, complete your file, and answer any of your questions.
3. We’ll work to determine how much PPP funding your qualify for.
4. If approved, and once you accept your offer, we’ll put the money in your account as soon as possible.

If you’re using Funding Circle for a PPP loan for the first time, you’ll have to complete an initial application—but this should take less than 10 minutes.

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