Businesses that already received Paycheck Protection Program loans can reapply for more forgivable funds beginning Wednesday.
The Second Draw PPP loans was made possible by the new $900 billion stimulus package passed in December. The bill created $285 billion in funds for PPP loans. The Second Draw program allows businesses that received a loan previously to apply for a second one with the same general loan terms as the first.
Under the stimulus package, the Paycheck Protection Program resumed on Jan. 11 for businesses looking to receive a loan for the first time. Businesses that already received a PPP loan can apply for a second loan on Wednesday.
The bill passed in December expands upon the eligible businesses for PPP loans, including non-profits, news outlets and churches.
Like the first loans, Second Draw PPP loans can be used to help fund payroll costs, including benefits, to pay for mortgage interest, rent, utilities, equipment costs related to COVID-19, uninsured property damage costs caused in 2020, and certain supplier costs and expenses for operations.
The Second Draw loans will be forgiven if the funding is spent on payroll costs and other eligible expenses with at least 60% covering payroll costs. Employee and compensation levels must also be maintained as was the case for the first round of PPP loans.
A businesses is eligible for a second draw loan if the borrower has used or will use the full amount of the previous loan, has no more than 300 employees and can demonstrate at least a 25% reduction in gross receipts in 2020 compared to 2019.
For most businesses, the loan amounts are capped at 2.5 times the average monthly payroll costs for 2019 or 2020 up to $2 million. For businesses in the accommodation and food services sector, the maximum loan amount is 3.5 times the average monthly payroll costs up to $2 million.
While businesses can start to apply on Jan. 13, the program is expected to run through March 31.
On Wednesday, the Small Business Administration announced that it so far has forgiven more than 1.1 million PPP loans worth more than $100 billion. For the smallest borrowers with loans up to $50,000, 88% of the loans were forgiven.