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The Small Business Administration released updated regulations in anticipation of the second draw of Paycheck Protection Program (PPP) funding.

Applications will open soon! We’ve helped 620 businesses successfully secure PPP loans and achieve forgiveness, so our team is highly experienced in navigating the process. If you’re interested in applying for this new round, please email [email protected] today to discuss your options.

Here’s what you need to know about the new guidelines:

Is my business eligible for a second-draw PPP loan?

The maximum number of employees is 300 per physical location. In addition, you must have experienced a revenue reduction of 25% or greater in 2020 relative to 2019. Calculate this by comparing your quarterly gross receipts for one quarter in 2020 with your gross receipts for the corresponding quarter of 2019.

If you’re applying for a PPP loan amount over $150K, you must submit a certification attesting you meet the 25% loss requirement up front and proof of the 25% decline. Those with loans under that amount won’t need to provide anything up front, but likely will when seeking forgiveness on the loan.

What are gross receipts?

The SBA defines gross receipts as “all revenue in whatever form received or accrued (in accordance with the entity’s accounting method) from whatever source, including from the sales of products or services, interest, dividends, rents, royalties, fees or commissions, reduced by returns or allowances.”

Sole proprietorships, independent contractors or self-employed individuals should reference “gross income” on their Schedule C. For everyone else, see “total income” plus costs of goods sold, excluding net capital gains or losses, as reported on your tax return.

What if I’ve already been approved for a PPP loan?

If you’ve already received a PPP loan in the first round of funding, you will be limited to receiving the maximum amount of $2MM. However, you must certify that you have used or will use the full amount of the previous PPP loan, and you must submit for forgiveness on your first round prior to applying for a second round.

What amount can I receive if it’s my first PPP loan?

If it’s your first PPP loan, it can be up to $10MM, with a maximum amount equal to 2.5 months of your average monthly payroll. However, businesses assigned an NAICS code that starts with 72 (food service, hotels/accommodations, RV parks, boarding houses, caterers, etc.) may receive a loan amount equal to 3.5 months of payroll costs.

How should I spend the loan in order to be forgiven?

In round one of PPP funding, you had to use 60% of the loan on payroll, which includes:

    • Wages, commissions, income or net earnings for sole proprietors and independent contractors (capped at $100,000 annually per employee)
    • Employee benefits like vacation; parental, family, medical or sick leave; retirement and health benefits, etc.
    • State and local taxes on compensation

This rule still applies — however the covered expenses have been expanded to also include expenses related to business software and cloud computing, property damage, payments to suppliers for goods essential to your business and worker protection related to COVID-19 health concerns and regulations.

How do I calculate the information needed for my application?

You may use your 2019 payroll calculations for your application, so if you previously applied for a PPP loan, you can use the same data. However, keep in mind the number of your employees today versus in 2019 in light of PPP loan forgiveness rules.

For example, if you had 10 employees in 2019, making $100K per year, you may have calculated your first PPP loan request as $1,000,000/12 months x 2.5x, for a total amount of $208,333. However, if you now only have eight employees, you wouldn’t want to qualify for $208,833 because you couldn’t prove full forgiveness using the SBA guidelines.

Can I apply for a PPP loan if I’m a sole proprietor?

Though there isn’t currently specific guidance on sole proprietorships in regards to PPP loans, it’s assumed that you would be eligible if you can prove the 25% revenue reduction.

What is the timeline for this new round of funding?

Applications will open soon. When submitted, the SBA will be reviewing your application before they provide approval (as opposed to the first round of funding, when they provided immediate approval). If you were approved for a PPP loan previously, expect the approval to take longer than before.

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