PPP Part Two: What Your Small Business Needs to Know
The second draw of the U.S. Paycheck Protection Program (“PPP”) permits an additional $285 billion in loans to pandemic-impacted businesses at an interest rate of one percent and with five-year maturation. PPP loans are not subject to collateral or personal guaranty requirement. An entity is only eligible for a second draw PPP loan if the entity received a first draw PPP loan, the full amount of which has been used on eligible expenses prior to disbursement of the second draw. The exclusivity period for small businesses with under 20 employees ends today at 5 p.m. ET.
New Reduced Revenue Requirement
The second draw of PPP loans is subject to additional restrictions, the most significant of which is the requirement that the borrower experienced reduced revenues of 25% or more in 2020 as compared to the same time period (either quarterly or annually) in 2019. In order to assert this revenue reduction, businesses must provide corroborating documentation in the form of (1) quarterly financial statements; (2) quarterly or monthly bank statements for the entity showing deposits from relevant quarters; or (3) annual IRS tax filings of the entity. More information on these documentation requirements can be found here.
Expanded Permissible Expenses. PPP loan funds may be used for the following categories of expenses: payroll, rent, mortgage interest, utilities, software, and cloud computing expenditures, costs not covered by insurance for property damage, worker safety costs.
Expanded Eligibility of Entities. Now, housing cooperatives, destination marketing organizations, news organizations, 501(c)(6) non-profit business associations are eligible for PPP loans.
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Reinhard von Hennigs