If you’re a business owner struggling as a result of the COVID-19 pandemic, you’ll be pleased to know that a second round of PPP funding has been signed into law.
The $900 billion COVID-19 relief bill includes an additional $284 billion for the Paycheck Protection Program (PPP) and extends many of the protections granted in the original Coronavirus Aid, Relief, and Economic Security Act (CARES Act). As of now, the program is expected to run until March 31, 2021.
In this guide, you’ll learn everything you need to know about the second round of PPP funding and how it’s different from the original loan program – including whether your business is eligible this time around.
How is the Second Round of PPP Loans Different From the First?
The original CARES act designated $349 billion for the creation of PPP for small businesses. At this time, the PPP second round contains $284 billion in funding.
Although the new bill is smaller than the first, it expands the types of businesses eligible for funding, especially non-profits and news outlets. It also targets small businesses that are in dire need of support.
Many people criticized the first round of PPP for leaving out minority-owned businesses and women-owned businesses. The new bill seeks to address this issue by dedicating a total of $12 billion towards this group.
Restaurants, hotels, and various seasonal businesses may be eligible for additional benefits and funding to offset their losses. They may qualify for a second PPP loan up to 3.5 times the amount of one month of 2019 payroll expenses—instead of the standard multiplier of 2.5.
One of the biggest issues business owners faced with the first round of PPP was that it initially didn’t allow businesses to deduct expenses paid for with PPP funding. This resulted in an additional burden for small business owners, but Trump later signed a bill to make these expenses tax deductible. Thankfully, the latest bill corrects this issue from the get-go.
The maximum loan amount was $10 million under the first round of funding, but has been reduced to $2 million for most businesses this time around. PPP borrowers will have the option to set their loan’s covered period between eight and 24 weeks, depending on their needs and goals.
Understanding Loan Forgiveness on the Second Round of PPP Loans
Businesses that obtain funds from the second round of PPP loans may also be eligible for PPP loan forgiveness – but only if they meet certain requirements. This includes spending at least 60% on payroll and the rest on other qualifying expenses within 24 weeks.
The list of qualifying expenses has been expanded to include even more costs that businesses are struggling to pay, such as:
- Mortgage payments
- Debt payments
- Costs of property damage
- Supplier costs
- Personal protection equipment
- Some operating expenses like cloud computing
For clarity on whether or not a certain expense you face qualifies as forgivable, be sure to consult with your tax professional or financial advisor.
Eligibility Guidelines for the Second PPP Loan
The second round of PPP funding gives businesses that did not receive financing in the first round another opportunity for financing. The latest bill also allows businesses that received a PPP loan in the first round to qualify again if they meet certain requirements.
If you’re a business owner applying for PPP funding for the first time, there are some important things to know about loan eligibility.
For starters, independent contractors, 501(c)(3) nonprofits, 501(c)(6) organizations, and small businesses that meet the size standards of the SBA (Small Business Administration) will qualify for funding. The PPP program allows first-time applicants with a maximum of 500 employees to receive funding.
Before applying, businesses and independent contractors should prepare their tax returns, average monthly payroll costs, employment records, gross receipts, and proof of payments for qualifying expenses like rent and utilities.
Can I Get Another PPP Loan?
Yes! Even if you’ve already received a PPP loan the first time around, you may be able to get another PPP loan, called a second draw. To apply for second draw on the PPP loan, you’ll have to file a second loan application.
How a Second Draw on PPP Funds Works
Small businesses, independent contractors, and non-profit organizations are all eligible to receive a second draw on PPP funds.
In order to secure additional PPP financing, you’ll first need to have used up all your funds from the original loan. Afterwards, you may be approved if you meet these requirements. The covered period for funds in previous rounds of funding has already elapsed, meaning this may not be a limitation for most applicants.
For starters, you can’t have more than 300 employees to qualify for the second round of PPP loans. Businesses applying for a second draw on PPP funds will also have to show that they suffered revenue losses of 25% or more in any quarter in 2020 versus the same quarter in 2019.
This means that if your business generated $100,000 in revenue in the third quarter of 2019 and only $50,000 in the third quarter of 2020, you suffered a revenue loss of 50% and would qualify for a second draw.
Second draw borrowers will also be able to apply for PPP loan forgiveness, as long as they have spent 60% of the funds on payroll expenses and another 40% on other qualifying expenses.
How Your Business Can Get Funds During COVID-19
While National isn’t directly facilitating the PPP loan during this round of funding, we are working with a trusted partner. To easily submit your PPP loan application, apply through Fountainhead.
While PPP loans can be a great resource for financial relief during COVID-19, they are not your only option for financing.
There are also numerous relief funds and grants your business can apply to during this time. If you’re still struggling with cash flow problems, try to evaluate where you can cut down on costs, defer payments, or create an updated business plan that takes COVID-19 into account.
Not every business will qualify for the second round of PPP funds. And even those that do qualify may not obtain the full amount they’re seeking, due to the spending guidelines. If you’re looking for financing to invest in growing or adapting your business, then be sure to consider funding from National.
Through our 75+ lender marketplace, you can qualify for financing options outside the PPP loan that offer more cash and have no spending restrictions to drive your business growth. You can compare multiple options with competitive rates and get funded in as little as hours—much faster than the SBA process, which can last weeks. Apply here to learn your options.