PPP Borrowing Resumes: Second Draw Loans Available

The 2021 Consolidated Appropriations Act (Pub. L. 116-260), which was signed Dec. 27 by President Donald Trump, renewed and expanded the Paycheck Protection Program (PPP) to allow businesses that previously received a loan to apply for a second PPP loan. 

The maximum amount of a second-draw loan is $2 million, with tax-free loan forgiveness for payroll costs and some non-payroll costs available on the full amount.

Under the new guidance, the Treasury Department and SBA said eligibility for second-draw loans would be met if a borrower:

• previously received a PPP loan and plans to use, or has used, the full amount for authorized purposes;
  
  
• has up to 300 employees; and
  
  
• can show that the business had at least a 25% reduction in gross receipts between comparable quarters in 2020 and 2019.

Under updated and expanded general PPP guidance, the department said:

• some existing PPP borrowers may request to modify the amount of their original PPP loan, now also known as a first-draw loan;
  
  
• borrowers can establish their loan’s coverage period to be any length, as long as it is at least eight weeks and no more than 24 weeks;
  
  
• loans would cover additional expenses, including those for operations, property damage, supplies, and worker-protection costs;
  
  
• seasonal employers would receive greater flexibility; and
  
  
• eligibility was expanded to include housing cooperatives, direct-marketing organizations, and tax-exempt groups covered by Internal Revenue Code Section 501(c)(6), such as chambers of commerce, real estate and trade boards, and business leagues.

Second-draw loans can be requested using the new SBA Form 2483-SD, Paycheck Protection Program Second Draw Borrower Application Form, and would not typically be requested with the revised SBA Form 2483. 

Employers submitting SBA Form 2483-SD generally must certify that they have no more than 300 employees and that before disbursement of their second-draw loan they will have fully used their first-draw loan for eligible expenses that may be covered by PPP loan amounts.

Namely does not provide legal, accounting, or tax advice. Please consult with professional counsel for any tax, accounting or legal questions.