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CARES Act

Second Draw PPP Loan Details


UPDATE: 01/09/2021
The SBA released the Second Draw PPP Borrower application earlier this morning. Please review the application and related instructions for completion. The SBA has stated that the portal for application submission may open on Wednesday, January 13th or shortly thereafter for community banks such as Premier Bank.

We encourage each eligible borrower to consult with your original PPP lender at Premier Bank and your accountant for further assistance in completing the Second Draw application. For further information on the Second Draw Payment Protection Program please reference the SBA website and the communication below regarding second round PPP. (which was also emailed on January 8, 2021.) 

The SBA continues to define and clarify program rules and eligibility requirements. Premier Bank will provide further information as it becomes available.

UPDATE: 01/08/2021
The SBA recently provided preliminary information related to an additional economic aid program labeled the “Paycheck Protection Program Second Draw Loan”. Similar to the “First Draw PPP Loans, the Second Draw Program is intended to provide financial relief to small businesses all over the country (less than 300 employees).
The key differences between First Draw PPP Loans and Second Draw PPP Loans are described in the most recent 42-page interim financial ruling provided by the SBA. Please reference this interim financial ruling for all PPP eligibility requirements.
Main elements for eligibility related to the Paycheck Protection Program Second Draw Loan are summarized below:
  • Borrower must have been in business prior to February 15, 2020
  • Borrower must have experienced a revenue reduction of 25% or greater in 2020 relative to 2019 (see below for further details*).
  • Borrower must have already received and spent 100% of the funds from their first Payment Protection Program Loan on eligible expenses.
  • Borrower must be in compliance with all requirements related to their first PPP Loan
  • Borrower must have less than 300 employees  
  • Other requirements for eligibility may exist and all information is subject to change by the SBA or the United States Treasury.
  • All loans will be processed by lenders under delegated SBA authority and lenders will be permitted to rely on certifications from the borrower to determine the borrower’s eligibility and use of loan proceeds.
Additional details within the PPP Second Draw Loan program include the following:
  • Maximum loan amount is the lesser of $2 million or 2.5 times the borrower’s average monthly payroll costs.
  • This figure increases to 3.5 times the borrower’s average monthly payroll costs for borrowers assigned NAICS codes beginning with 72 at the time of disbursement.
  • No collateral will be required
  • No personal guarantees will be required
  • The interest rate will be 1%
  • Loan maturity of up to five years
*The Economic Aid Act provides that, to be eligible for a Second Draw PPP Loan, the borrower must have experienced a revenue reduction of 25% or greater in 2020 relative to 2019. A borrower must calculate this revenue reduction by comparing the borrower’s quarterly gross receipts for one quarter in 2020 with the borrower’s gross receipts for the corresponding quarter of 2019.
For example, a borrower with gross receipts of $50,000 in the second quarter of 2019 and gross receipts of $30,000 in the second quarter of 2020 has experienced a revenue reduction of 40% between the quarters and is therefore eligible for a Second Draw PPP Loan (assuming all other eligibility criteria are met).
The SBA has not provided an application for the Second Draw PPP Loans as of yet, nor has it opened a portal for submission of any applications. Premier Bank is providing the information above for reference purposes and would like each potential borrower to be prepared when the final PPP application is provided. Please consult with your accountant as soon as possible if you are unsure about the eligibility requirement concerning a 25% revenue reduction in 2020 vs. 2019. Funds for this program are limited therefore any applicable financial data should be collected quickly in anticipation of the SBA releasing a final Second Draw PPP Loan application.

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