The Small Business Administration (SBA) and U.S. Treasury Department resumed the Paycheck Protection Program (PPP) for First Draw Loans on the week of January 11, 2021, and on January 13, 2021, Second Draw PPP loans returned with the same general terms. Small businesses can apply for First or Second Draw PPP loans from participating lenders now through March 31, 2021.

First-time PPP borrowers may apply for First Draw Loans, while those who have previously borrowed money through PPP programs may apply for Second Draw loans.

Additionally, existing PPP borrowers who have not received loan forgiveness by December 27, 2020 may either reapply for a First Draw PPP Loan if they previously returned some or all of their initial First Draw PPP Loan funds, or under certain circumstances, request to modify their initial First Draw PPP Loan amount if they had not previously accepted the full amount for which they are eligible.

First Draw PPP Loan Details and Eligibility

PPP loans are designed to help eligible small businesses keep employees on the payroll and manage other essential expenses during the COVID economic crisis. The funds can be used for authorized benefit costs, worker protection expenses, utilities, mortgage and other covered expenditures.

What are the Qualifications for a First Draw PPP Loan?

Small businesses that meet the following criteria can apply for a first draw PPP loan:

What’s the First Draw PPP Loan Principal Limit?

First Draw PPP Loans are available for up to $10 million dollars, though the maximum amount depends on a small business’s average payroll expenses.

Second Draw PPP Loan Details and Eligibility 

Eligible PPP loan borrowers can apply for a Second Draw from participating lenders through participating SBA lenders, including cooperating banks, credit unions, non-bank lenders and other financial institutions. Like First Draw PPP loans, the funds can be used for approved costs related to payroll and employee benefit costs, employee protection expenses, mortgage and utilities are eligible for full forgiveness with the same general terms.

What Are the Qualifications for a Second Draw PPP Loan?

Small businesses that satisfy the following criteria are eligible for a Second Draw PPP Loan through participating SBA lenders:

  • Previously received a PPP First Draw loan and will or has used the principal loan for authorized purposes by the disbursement date of the Second Draw
  • Can provide proof of 25% or more gross revenue reduction from 2019 to 2020
  • Has 300 or fewer employees

What’s the Second Draw PPP Loan Principal Limit?

Most eligible small businesses may borrow up to 2.5x the average monthly 2019 or 2020 payroll costs, up to $2 million. For Accommodation and Food Services industry borrowers, the maximum Second Draw PPP Loan amount is 3.5x the average monthly payroll costs for 2019 or 2020, up to $2 million.

What Are the Terms for PPP Loan Forgiveness?

Businesses that meet the following criteria in the 8- to 24-week period following loan disbursement are eligible for full PPP loan forgiveness:

  • Loan funds are spent on eligible expenses
  • A minimum of 60% of the funds are spent on payroll expenses
  • Compensation and employee levels are maintained

How do I Apply for a PPP Loan?

First Draw and Second Draw PPP loans are available from qualified SBA lenders. Due to their uniform nature, all First and Second Draw PPP Loans have the same general terms, regardless of the lender or location.

The information in this article is provided for educational and informational purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness or fitness for any particular purpose. The information in this article is not intended to be and does not constitute financial, legal or any other advice. The information in this article is general in nature and is not specific to you the user or anyone else.

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