By: William A. Buck, Esq.
On December 27, 2020, the President signed into law The Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (“Economic Aid Act”), which authorizes the Small Business Administration (“SBA”) to guarantee additional loans under the Paycheck Protection Program, established under the Coronavirus Aid, Relief, and Economic Security Act. Section 311 of the Economic Aid Act provides a temporary second draw of the Paycheck Protection Program (“Second Draw Loans”) for eligible borrowers. The SBA has issued an Interim Final Rule that outlines the eligibility criteria for Second Draw Loans through the Paycheck Protection Program.
Outlined below are the eligibility criteria for Second Draw Loans through the Paycheck Protection Program.
In order to receive Second Draw Loans, eligible entities must:
- Employ not more than 300 employees;
- Have used or will use the full amount of their first PPP loan by the time the Second Draw Loan is received; and
- Demonstrate at least a 25 percent reduction in gross receipts in the first, second, or third calendar quarters of 2020 relative to the same 2019 calendar quarter.
Payroll Cost Calculation
The SBA Interim Final Rule provides the documentation required to substantiate an applicant’s payroll cost calculations for a Second Draw Loan, which is substantially similar to the first PPP loan.
- Eligible entities may apply for the maximum loan amount equal to the lesser of:
- 2.5 months of employer’s average monthly payroll costs, or $2 Million
- Eligible entities in Accommodation and Restaurant (NAICS Code beginning with 72):
- 3.5 months of employer’s average monthly payroll costs, or $2 Million
Second Draw PPP Loan Application
For Second Draw PPP Loan Application, no additional documentation to substantiate payroll costs will be required if the eligible entity:
(i) used calendar year 2019 figures to determine its first loan amount,
(ii) used calendar year 2019 figures to determine its Second Draw Loan amount (instead of calendar year 2020), and
(iii) the lender for the applicant’s Second Draw Loan is the same as the lender that made the applicant’s first loan.
For loans with a principal amount greater than $150,000, the applicant must also submit documentation adequate to establish that the applicant experienced a revenue reduction of 25% or greater in 2020 relative to 2019. Such documentation may include relevant tax forms, including annual tax forms, or, if relevant tax forms are not available, quarterly financial statements or bank statements.
If you have any questions about Second Draw PPP Loans or would like to get started on the process, please contact us at firstname.lastname@example.org and we will get you started.
Leech Tishman’s Facebook Page: https://www.facebook.com/leechtishman
Leech Tishman’s Twitter: https://twitter.com/LeechTishman
Leech Tishman’s Company Page on LinkedIn: https://www.linkedin.com/company/leech-tishman
Leech Tishman Fuscaldo & Lampl is a full-service law firm dedicated to assisting individuals, businesses, and institutions. Leech Tishman offers legal services in alternative dispute resolution, aviation & aerospace, bankruptcy & creditors’ rights, cannabis, construction, corporate, data privacy & cybersecurity, employee benefits, employment, energy, environmental, estates & trusts, family law, government relations, immigration, insurance coverage, intellectual property, international legal matters, litigation, real estate, and taxation. Headquartered in Pittsburgh, PA, Leech Tishman also has offices in Chicago, Los Angeles, New York, Philadelphia, Sarasota and Wilmington, DE.