The new $900 billion stimulus bill, the Consolidated Appropriations Act, provides a variety of financial stimulus measures, including $284 billion for a second round of Paycheck Protection Program loans (PPP2) to an expanded group of businesses facing difficulties during COVID-19. Here are details about who qualifies for PPP2 and the application process as it stands as of the writing of this article.

PPP2 Details

PPP2 loans are available to both first time borrowers and those who took advantage of the first round of PPP loans. Although similar, there are notable differences between PPP1 and PPP2:

  • Borrowers can receive up to 2.5 times their average monthly payroll costs—same as the first round—however the new loans are capped at $2M.
  • Borrowers may elect either an 8-week or 24-week covered period in which to use the loan.
  • Second-time PPP borrowers
    • Must have fewer than 300 employees, but there are exceptions:
      • 500 for accommodation employers
      • 500 for food service employers classified in NAICS Code 72
    • Must have used (or will use) the full amount of their first loan and demonstrate a 25% revenue decline in any 2020 quarter compared to the same quarter in 2019.
  • First-time PPP borrowers, who are eligible for other SBA 7 (a) loans may have up to 500 employees
  • Self-employed individuals (including sole proprietors and independent contractors), churches and other non-profits, and 501(c)(6) organizations are eligible for PPP2.

Borrowers are still required to spend at least 60% of the loan proceeds on payroll costs, while the balance can be used for rent, mortgage interest, utilities, and newly added eligible expenses including worker protection expenses (such as PPE), covered property damage costs, covered supplier costs, and operating costs including cloud computing and accounting services.

PPP2 Application Process

Applications should be available in early January 2021. As with PPP1, banks will be issuing PPP2 loans and you should consider using the lender you used for PPP1, or a smaller local bank. Check with your lender now to see when they anticipate opening their application window. Some lenders are taking names for waiting lists.

Businesses seeking a PPP2 loan should be proactive in gathering financial data to support economic need for additional funding, in advance of the opening of the application process. For example:

  • Comparative financial reports that reveal a significant revenue reduction (at least 25% in any quarter of 2020),
  • number of employees (businesses with 300 or fewer employees will be eligible for this round),
  • current operating expense levels, and
  • timing of the exhaustion of initial PPP funds

Please note that the Small Business Administration (SBA) has not yet issued guidance and regulations related to this second round of PPP. We will provide updates as they become available.

If you have questions about PPP2, or any COVID-19 related issues, please contact your HW&Co. advisor.

Tony LaNasa,

Jim Horkey, CPA/ABV, CFF, CM&AA

Disclaimer:  Information in this article is subject to change and is based upon our current understanding as of the issue date. This is a constantly evolving process as the SBA has been issuing new or changed guidance on a frequent basis.