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Paycheck Protection Program Round 2

February 17, 2021

SBA, in consultation with the U.S. Treasury Department, reopened the Paycheck Protection Program (PPP) for First Draw and Second Draw PPP Loans in January of 2021.   

On December 27, 2020, a $900 billion COVID-19 aid package was signed into law as part of the larger omnibus bill funding the federal government. This bill includes $284 billion in new funding for the Paycheck Protection Program (PPP), the federal loan program established to support businesses impacted by this lengthy pandemic. 

Now that Congress has reopened the application window for small business owners and entrepreneurs in 2021 to apply for the #PaycheckProtectionProgram​, what does that mean and and how do you get one?  The deadline to apply for the PPP is March 31, 2021. Find out more below. 

First Draw

The Paycheck Protection Program is a loan designed to provide a direct incentive for small businesses to keep their workers on payroll. First Draw PPP Loans can be used to help fund payroll costs, including benefits, and may also be used to pay for mortgage interest, rent, utilities, worker protection costs related to COVID-19, uninsured property damage costs caused by looting or vandalism during 2020, and certain supplier costs and expenses for operations.

SBA will forgive loans if all employee retention criteria are met, and the funds are used for eligible expenses.

  • PPP loans have an interest rate of 1%.
  • Loans issued prior to June 5, 2020 have a maturity of two years. Loans issued after June 5, 2020 have a maturity of five years.
  • Loan payments will be deferred for borrowers who apply for loan forgiveness until SBA remits the borrower's loan forgiveness amount to the lender. If a borrower does not apply for loan forgiveness, payments are deferred 10 months after the end of the covered period for the borrower’s loan forgiveness (either 8 weeks or 24 weeks).
  • No collateral or personal guarantees are required.
  • Neither the government nor lenders will charge small businesses any fees.

Who may qualify

The following entities affected by Coronavirus (COVID-19) may be eligible:

  • Sole proprietors, independent contractors, and self-employed persons
  • Any small business concern that meets SBA’s size standards (either the industry size standard or the alternative size standard)
  • Any business, 501(c)(3) non-profit organization, 501(c)(19) veterans organization, or tribal business concern (sec. 31(b)(2)(C) of the Small Business Act) with the greater of:
    • 500 employees, or
    • That meets the SBA industry size standard if more than 500
  • Any business with a NAICS code that begins with 72 (Accommodations and Food Services) that has more than one physical location and employs less than 500 per location

How and when to apply

You can apply for a First Draw PPP Loan until March 31, 2021. SBA is currently accepting First Draw PPP loan applications from participating lenders. Lender Match can help connect you with a lender. You can also view all lenders near you on a map. All new First Draw PPP Loans will have the same terms regardless of lender or borrower.

If you wish to begin preparing your application, you can download the following PPP borrower application form to see the information that will be requested from you when you apply with a lender:

Second Draw:

SBA is also currently accepting Second Draw PPP loan applications from participating lenders. Lender Match can help connect you with a lender. You can also view all lenders near you on a map.

At least $25 billion is being set aside for Second Draw PPP Loans to eligible borrowers with a maximum of 10 employees or for loans of $250,000 or less to eligible borrowers in low or moderate income neighborhoods.

Loan details

The Paycheck Protection Program (PPP) now allows certain eligible borrowers that previously received a PPP loan to apply for a Second Draw PPP Loan with the same general loan terms as their First Draw PPP Loan. 

Second Draw PPP Loans can be used to help fund payroll costs, including benefits. Funds can also be used to pay for mortgage interest, rent, utilities, worker protection costs related to COVID-19, uninsured property damage costs caused by looting or vandalism during 2020, and certain supplier costs and expenses for operations.

Maximum loan amount and increased assistance for accommodation and food services businesses

For most borrowers, the maximum loan amount of a Second Draw PPP Loan is 2.5x average monthly 2019 or 2020 payroll costs up to $2 million. For borrowers in the Accommodation and Food Services sector (use NAICS 72 to confirm), the maximum loan amount for a Second Draw PPP Loan is 3.5x average monthly 2019 or 2020 payroll costs up to $2 million.

Who may qualify

A borrower is generally eligible for a Second Draw PPP Loan if the borrower: 

  • Previously received a First Draw PPP Loan and will or has used the full amount only for authorized uses
  • Has no more than 300 employees; and
  • Can demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020

How and when to apply

You can apply for a Second Draw PPP Loan from January 13, 2021, until March 31, 2021. SBA is currently accepting Second Draw PPP loan applications from participating lenders. Lender Match can help connect you with a lender. You can also view all lenders near you on a map. All Second Draw PPP Loans will have the same terms regardless of lender or borrower. 

If you wish to begin preparing your application, you can download the following PPP borrower application form to see the information that will be requested from you when you apply with a lender:

Existing borrowers

Existing borrowers can create an account in the SBA Capital Access Financial System (or CAFS) to monitor their loan status. Get account enrollment instructions.

Can Contractors & Self-Employed Apply For PPP Loans?

The Paycheck Protection Program’s premise is simple: The SBA is backing loans to borrowers that need payroll assistance due to the economic hardships from the coronavirus. Previously, only S/C-corporations, tribal businesses, and businesses with up to 500 employees could apply for loans when the program first launched last April. Now, sole proprietors, independent contractors, and self-employed individuals can apply as well. The terms for the loans are as follows: The PPP loans are designed to cover payroll costs, including benefits, for individual salaries up to $100,000; rent; utilities from buildings rented before February 15th, 2020; interest on mortgage obligations; business-related software; necessary supplier costs; COVID-related worker protection measures; and property damage incurred from civil unrest.

PPP loans for the self-employed and contractors can be used to give yourself a salary (wages, commissions, tips). Qualified borrowers can apply for 2.5 times their average payroll cost for 12 months. This amount is capped at $100,000 on an annualized basis for each employee.

One of the best parts of these PPP loans is that they are forgivable if you use the loan on operational costs (payroll first) during the 24 weeks following the loan disbursement. (That’s assuming you follow the loan forgiveness stipulations outlined in the Paycheck Protection Flexibility Act, which includes a mandate that 60% of the loan must be used for payroll alone.) PPP loans have a 1% interest rate, a loan term of up to five years with no prepayment penalty, and a six-month payment deferral. (Side note: If your business hasn’t been operational for a full year, the government provides alternative ways to measure average payroll.)

PPP Requirements For Self-Employed People

PPP loans are designed to reach as many small business owners as possible, including the self-employed. While the terms are broad, the first qualification is that you must demonstrate a need based on the current COVID-19 world. Be sure to specify that you are seeking aid related to the COVID-19/coronavirus disaster.

For those of you who received a first draw PPP loan in 2020, the requirements are more precise: you’ll need gross receipts from any calendar quarter in 2020 that show at least a 25% reduction in gross revenue from the same quarter in 2019 to qualify for a second draw PPP loan.

If you collect 1099s or operate in the gig economy, you are included in the January 11th loan rollout. Also included are people who have 1065s or 1120s with no employees.

What You Need To Apply For A PPP Loan

If you’re applying for a PPP loan as an independent contractor or freelancer, you will need to gather the necessary paperwork to get your loan moving. In the eyes of the IRS, you will be treated as a sole proprietor. You will need your Schedule C on line 31 based on your 1099s from your 2019 or 2020 tax return (whichever was used to calculate the loan amount). This number is your net profit and can be used to determine salary. You may also add up your 1099s together from the past year and divide it by 12 to receive a rough monthly estimate.

Loans open soon, so your best use of time is making sure you have verified income and updated bookkeeping. Those should include:

  • 2019 or 2020 tax returns
  • Federal Tax Identification Number 
  • Payroll tax filings
  • 1099s-MISC records
  • Income and expenses, bank records 

Forgiveness Requirements For Self-Employed

Forgiveness requirements for PPP loans for self-employed workers are largely the same as the requirements for any business seeking to have their PPP loans forgiven.  

You’ll need to spend your loan proceeds on qualifying expenses to have your loan forgiven. Your forgiveness application form should spell out what kinds of documentation you’ll need to provide that shows how you spent your loan funds. Forgivable expenses include the following:

  • Mortgage interest
  • Rent
  • Utilities
  • Software
  • Property damage from civil unrest
  • Necessary supplier costs
  • COVID-related protective measures

Additionally, you must spend your loan proceeds within 24 weeks of disbursement. You can also use your funds to cover expenses incurred during the 24-week period.

Naturally, the requirement that a PPP loan-receiving entity maintains its full-time staff and its payroll does not apply to the self-employed.

Where To Apply For A PPP Loan

At the moment, there are over 1,800 banks and lenders preapproved with the SBA to help meet the need and respond to the rush of applications. Be sure to have all your information ready. Experts say it’s best to go through an FDIC-insured bank (other lenders might be brokering for a fee — best to go right to the source). As most banks are operating remotely, many are telling borrowers not to contact branches directly but to work with their online application. Check with your local community bank, but not all small banks are equipped to work fast on SBA loans. As a next resource, check out the SBA Preferred Lending Partners.

Congressmember Espaillat hosted #RepresentNYC​ with special guests Assemblymember Carmen De La Rosa, and Beth Goldberg and John Mallano from The Small Business Administration New York District Office to discuss the #PaycheckProtectionProgram​. Watch RepresentNYC Sundays at 7pm and Wednesdays at 9pm on MNN1 (Spectrum 34 & 1995, RCN 82, FiOS 33) or MNNHD (Spectrum 1993).  

The full "Represent NYC" episode covering PPP loans will air on 2/21 and 2/24. 

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