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Harry Teichman Explains Paycheck Protection Program Second Draw Loans


On December 7th, the new round of Paycheck Protection Program legislation was passed. It is known as “PPP2” or “PPP Second Draw Loans” because the new PPP program is a second draw of the first PPP.

The first round of these loans was intended to provide economic relief to businesses negatively impacted by the COVID-19 pandemic. The pandemic has lasted longer than anyone anticipated so the government has now passed PPP2.

Just like PPP, the amount of aid available to companies under PPP2 is based on payroll. For restaurants and certain other businesses, the amount is 3.5 times the total employee payroll during the measuring period. A business need not have applied for PPP in order to be eligible for PPP2. However, if a business received funds under the original PPP, the business must certify that it used, or will use, the entirety of the PPP money it received as part of the application for the PPP2 money.

A few of the noteworthy changes in PPP2 are as follows:

  • Companies must employee 300 or fewer employees;
  • Revenue reduction of 25% or more in 2020 over 2019;
  • Must have used entire original PPP on eligible items (i.e. rent, payroll, etc.);
  • Forgiveness of the first PPP loan does not count in gross revenue for purposes of determining the 25% reduction;
  • If a company is permanently not doing any business, that company cannot receive a second loan (a temporary closure is ok);
  • The measurement for payroll when calculating the amount a company may borrow is either the 12-month period prior to when the loan was originally made or the 2020 calendar year;
  • A single corporate group cannot receive more than $4 million – meaning the total amount received under PPP2 cannot be more than $4 million, even where the affiliation rules are relaxed.

To determine your eligibility, we recommend reviewing the Interim Final Rule (IFR) at https://home.treasury.gov/system/files/136/PPP-IFR-Second-Draw-Loans.pdf

For more information, please contact us at 813-254-8998. We are here to help.

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