The Congress has passed the Paycheck Protection Program Second Draw
The New PPP package is subject to the following parameters:
- First, the maximum loan amount available to a business or nonprofit decreased from $10 million to $2 million per borrower.
- Second, subject to certain exceptions, the maximum workforce size for an eligible borrower is reduced from 500 to 300 employees.
- Third, a business or nonprofit must demonstrate a 25% loss of revenue during at least one quarter of 2020 compared to the corresponding quarter of 2019
Prior PPP Loan
The borrower must be a prior PPP borrower that has used or will use the full amount of their first PPP loan on or before the expected date of disbursement of the PPP second draw loan.
One Loan per Borrower
Only one PPP second draw loan may be obtained per business or nonprofit, regardless of the number of locations where its workforce is employed.
Size of Workforce Cap
The borrower may not have more than 300 employees
Loss of Revenue
The business or nonprofit must have suffered a 25% reduction in gross receipts in any quarter of 2020 compared to the corresponding 2019 quarter. For businesses that were not in operation in Q1, Q2, Q3, and Q4 of 2019, the legislation provides similar applicable timelines. Applications submitted on or after January 1, 2021 are eligible to utilize the gross receipts from the fourth quarter of 2020
Certification of Financial Need
The borrower must certify its economic “need” for the loan, as similarly applied to initial PPP loans, that “… current economic uncertainty makes this loan request necessary to support the ongoing operations” of the business or nonprofit. A potential PPP second draw borrower must consider whether it satisfies this condition of “current” need in addition to satisfying the 25% revenue reduction from comparable quarters of 2020 compared to 2019.
Loan Amounts based on Monthly Payroll
In general, borrowers may receive a loan of up to a maximum amount that is the lesser of (1) 2.5 times the average monthly payroll costs in the one year prior to the loan or the calendar year 2019 or (2) $2 million, with some exceptions.
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