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Second Draw - Paycheck Protection Program

Special rules for second draw ppp loanSecond Draw vs First Draw - Paycheck Protection Program

You may have seen information about the second round of PPP loans that were a part of the latest COVID-19 relief package. The SBA reopened the program on January 11 for first time borrowers. The program has been reopened for second draw borrowers on January 13. The program has been extended through March 31, 2021.

There are specific rules an organization must meet in order to receive funds under the second draw. 

 You can also watch our mini-webinar where Managing Partner John Seale, CPA.CITP discusses the PPP Loan Top 10 in 10 here:

 Watch Webinar Now


Below is the summary of the SBA guidance released.

Special Rules for Second Draw Hardest Hit Borrowers

  • Must fully spend 1st PPP loan prior to disbursement of Second Draw.
    • Note that if your First Draw Loan Forgiveness Application hasn't been reviewed and approved by the SBA, you are not excluded from applying for Second Draw loans.
  • Generally must have 300 or fewer employees (per location).
  • Must demonstrate at least a 25% reduction in gross receipts, for at least one quarter, between corresponding quarters in 2020 and 2019. The borrower may select the relevant quarter for the comparison.
    • Based on calendar quarter (not 3-month period or fiscal quarter)
    • A borrower that was in operation in all four quarters of 2019 can compare total annual receipts in 2020 to annual receipts in 2019 rather than doing a quarter-by-quarter comparison.
    • Contact us to determine how to calculate gross receipts.
  • Loans greater than $150,000 must include documentation to support 25% or greater reduction in gross receipts at the time they submit the Second Draw application.
  • Loans less than $150,000 must submit documentation proof of 25% reduction in gross receipts by the date of the loan forgiveness application.
  • Special rules apply to borrowers that were not in business for all or part of 2020.
  • Second Draw loan amount is the lesser of 2.5 months of average monthly payroll costs with a max of $2 million.
  • May only receive 1 Second Draw loan.

Accommodations or Food Services Industries

  • May obtain increased loan amount of 3.5 times the average monthly payroll costs, up to $2 million.

​Key Changes for How Funds May be Used for First Draw and Second Draw Loans

  • Disability, life, vision and dental insurance employer contributions can be included.
  • Covered operations include expenditures such as: software or cloud computing, product or service delivery, sales/billing/payroll tracking/HR, or accounting functions.
  • Property damage costs due to public disturbances are covered.
  • Supplier costs are covered.
  • Covered worker protection expenditures include: adapting a business to comply with established guidance and protocols like drive-thru windows, air pressure filtration systems, health screening, and PPE.
  • Partnerships that received a PPP loan may request the SBA increase the loan to cover partner compensation (if it was not included on the original loan), even if the loan has been fully disbursed.

Entities Ineligible for Second Draw Loans

  • Entities ineligible to receive SBA loans.
  • Entities engaged in lobbying or political activities.
  • Entities with significant ties to the People's Republic of China or the Special Administrative Region of Hong Kong (20% or more owned by an entity organized under the laws of or with significant operations in China or Hong Kong or with a Director who is a resident of China).

Please note that the maturity date of First and Second Draw PPP Loans is five (5) years. Additionally, payroll costs included for determining Employer Retention Credit are not eligible for forgiveness.

For more information visit our COVID-19 Guidance Center.

Tips of where to get your information about the virus

We are committed to serving clients with care, and we are confident we are taking precautionary measures to promote the health and safety of our staff and clients. We know that this is a stressful time for everyone, and we hope that you, your family and our community stay safe.

Please call us at 800-676-7567 if you have any questions


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