FAQ: Applying for a Second Draw PPP loan

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The Paycheck Protection Program closed in May 2021. This information has been archived for reference only.

With the Second Draw Paycheck Protection Program (PPP), small business borrowers can borrow additional funds for COVID-19 relief if they received a first PPP loan. Here are some helpful answers to the most common questions we receive on this program, including answers on how to apply for a second PPP loan.

FAQs: Applying for Second Draw PPP

In some cases, yes, your supporting documentation will carry over from your first loan application. However, you will be required to complete new SBA forms and sign new certifications. You are encouraged to gather documentation as if you were applying for the first time, as some documentation requirements are different.

Yes, our application is open to all qualified business owners. You are not required to use the same lender for your second PPP loan.

You will need your SBA Loan Number from your first PPP loan when applying for a Second Draw PPP loan. This is a ten-digit, all numerical number that was included on your closing documents for the first loan. 

If you received your first loan from Pursuit, your closing documents were emailed to you through Docusign. If  you cannot locate your loan closing documents, please email [email protected] and our team will assist you.  

FAQs: PPP Application Portal Questions

No – if you returned the PPP funding prior to December 27, 2020 you will select ‘No’ when asked if you received a prior PPP loan.

If your business is a franchise, please visit the SBA Franchise Directory to search to see if your franchise is on the list. Please include the Franchise Name and Franchise Code from the list on your application.

There is no delineation between full-time and part-time employees as part of the PPP application. SBA simply asks for a headcount of employees. This figure is purely for eligibility and does not impact loan forgiveness.

The Taxpayer Identification Number is the primary record indicator used by SBA to approve loans. If the business has an Employer Identification Number (EIN, formatted as XX-XXXXXXX), click the toggle for “Use Tax ID” and input this number. In most circumstances you will apply using the business EIN.

If you are a sole proprietorship, self-employed individual, or independent contractor and do not have an EIN, you may enter your Social Security Number (SSN, formatted as XXX-XX-XXXX) here instead.

If you received your first loan from Pursuit, your closing documents were emailed to you through Docusign. If  you cannot locate your loan closing documents, please email [email protected] and our team will assist you.  

The North American Industry Classification System (NAICS) Code is the specific industry the business operates in. This is a six-digit numeric code. You can typically find this code on your business tax return. If you cannot find this code on your tax documents, please review the NAICS website. Please see screenshots below for where you can find this code on Schedule C of IRS Form 1040, IRS Form 1065, and IRS Form 1120, respectively.

Please use our loan entity type guide to find the best loan entity type for your business.

FAQs: Second Draw PPP Eligibility

Here are the general eligibility requirements for a second PPP loan:

  • You received a first PPP loan
  • You must have used the full amount of your first PPP loan for authorized uses by the expected date of disbursement of your second draw PPP loan. Please note that your loan does not need to be forgiven to qualify.
  • You must have 300 or fewer employees. If you are an employer in accommodation or food services (NAICS code starting with 72), you may have 300 employees at each of your business’s physical locations.
  • Your business must be able to demonstrate a revenue reduction of 25% or greater in 2020 relative to 2019. This is calculated by comparing your quarterly gross receipts for one quarter in 2020 with your gross receipts for the corresponding quarter of 2019. 
  • Your business cannot be permanently closed. If your business has temporarily closed or suspended, you are eligible.
  • Eligible business types include for-profit businesses, certain non-profits, independent contractors, sole proprietors, tribal businesses, and small agricultural coops. 

No. However, you must have used (or will use) the full amount of the initial PPP loan for authorized purposes on or before the expected date of disbursement of the Second Draw PPP loan.

Yes, you can still obtain a PPP loan for the first time. Details and requirements vary slightly from the Second Draw program; please visit our PPP information page for first time borrowers.

Yes – so long as your business is temporarily closed or suspended and plans on reopening. Businesses that are permanently closed are ineligible from receiving a Second Draw PPP loan.

No, if your business or any owner of the applying business is currently involved in bankruptcy, you are not eligible.

If you filed for Chapter 7 bankruptcy, you are eligible to apply for PPP after the Bankruptcy Court has entered a discharge order in the case or if the case has been dismissed.

For Chapter 11, 12 or 13 bankruptcy petitions, you are eligible to apply after the Bankruptcy Court has entered an order confirming the plan in the case or if the case has been dismissed.

 

FAQs: Second Draw PPP Loan Details

It could be the same, but there are a few differences to the program requirements that may result in a different loan amount. Most importantly, accommodation and food services businesses (NAICS codes beginning with 72) are now eligible for 3.5x their average monthly payroll (this compares to First Draw PPP loans which were based on 2.5x average monthly payroll).

Further, the regulations allow for three ways of calculating your business’ average monthly payroll. You can choose what works best for you, and the calculation may be different than what was used for your First Draw PPP loan application.

The average monthly payroll calculation may be based on one of the following methods (please note that businesses that began operating in 2019 and/or seasonal businesses have separate distinct calculations):

  • Payroll costs during Calendar Year 2019
  • Payroll costs during Calendar Year 2020
  • Payroll costs during the twelve-month period prior to when the loan is made

We’ve created in-depth tools that make it easy to calculate your PPP loan amount. Please visit our “How to calculate your PPP loan amount” guide and reference our “Ultimate PPP loan amount calculator.

No, in the vast majority of cases you must apply again.

One exception is if  you believe your First Draw PPP loan was calculated incorrectly due to a change in SBA regulations (e.g. seasonal business definition, partnership self-employment income). In this case, you can request to have your First Draw PPP loan increased based on the change in rules. Please email [email protected] with your explanation and supporting documents to justify an increase. If you request an increase, please note that the SBA does not allow processing until January 25th and you must also spend the funds prior to receiving a Second Draw PPP loan.

Please visit our in-depth step-by-step guide on calculating a 25% revenue reduction to qualify for PPP.

In general, to calculate your decline in revenue, compare your quarterly gross receipts for any quarter in 2020 with your 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).

Do NOT include the proceeds from your first PPP loan in your gross receipts/revenue figures.

If you were open in all four quarters of 2019, you can also compare your revenue to all of 2020 and submit copies of your annual tax forms that substantiate the revenue decline.

You must calculate your revenue decline using a calendar quarter:

Q1 – January, February, March

Q2 – April, May, June

Q3 – July, August, September

Q4 – October, November, December

If you spend your PPP loan according to SBA’s guidelines, it will be forgiven. The general guidelines are as follows. You must spend your loan within 24 weeks to have it fully forgiven.

  • 60% of your loan must be spent on payroll costs
  • The remaining 40% may be spent on other costs that include:
    • Rent and utilities
    • Interest on mortgages and other loans
    • Payment for any software, cloud computing, and other human resources and accounting needs
    • Costs related to property damage due to public disturbances that occurred during 2020 that are not covered by insurance
    • Payments to a supplier pursuant to a contract, purchase order, or order for goods that were in effect prior to receiving the PPP loan that are essential to your operations when the payments were made. Supplier costs for perishable goods can be made before or during the life of the loan
    • Personal protective equipment and costs that you incurred to help your business comply with Federal, State, or local requirements beginning on March 1, 2020

Please note that as your lender, Pursuit is not able to provide in-depth or customized advice on loan forgiveness. We encourage you to speak with your accountant or attorney about specific questions. You may also visit our more detailed PPP forgiveness FAQ.

You should use the revenue figures that are consistent with your entity’s tax accounting method. If you file annual tax returns on an accrual basis, then your revenue reduction should be calculated under the same method. You should not change accounting methods to calculate your revenue reduction.

If your business was not operational during all of 2019, SBA has provided alternate calculations to ensure that you can qualify for a second PPP loan. Depending on when your business began generating revenues, there are three alternate calculations. We recommend using our PPP loan amount calculator because it automatically assists you in calculating based on these methods.

Option 1: My business was not operating during the first or second quarter of 2019, but was in business during the third and fourth quarter of 2019. Said another way, the business began operations in July, August, or September 2019.

  • You can compare revenues from the first, second, third, or fourth quarter of 2020 with the applicant’s revenue during either the third or fourth quarter of 2019.

Option 2: My business was not operating during the first, second, or third quarter of 2019, but was in business during the fourth quarter of 2019. Said another way, the business began operations during October, November, or December 2019.

  • You can compare revenues from the first, second, third, or fourth quarter of 2020 with the applicant’s revenue during the fourth quarter of 2019.

Option 3: My business was not operating at all during 2019, but was in operation on February 15, 2020.

  • You can compare revenues from the second, third, or fourth quarter of 2020 with the applicant’s revenue during the first quarter of 2020.

No – there is an important distinction here. For purposes of calculating a 25% drop in revenue, the term “affiliate” is defined in Section 6033 of the Internal Revenue Code of 1986. This definition relates to a parent and subsidiary relationship where the entities are related through common ownership and are treated as one for federal income tax purposes. Other entities that SBA may define as affiliated do not count within this definition and therefore are not part of the revenue reduction calculation.

If your business has an Employer Identification Number (EIN, structured as XX-XXXXXXX), you should use this as your identifying number on your application. Only in instances where your business does not have an EIN should you use your Social Security Number (SSN, structured as XXX-XX-XXXX) when you apply.

FAQs: Required documents

You will be required to supply documents that prove that your business experienced a revenue reduction of 25% or greater in 2020 relative to 2019. These documents may include relevant tax forms, including annual tax forms or quarterly financial statements or bank statements. It is your responsibility to provide clear documentation and support of the 25% or greater decline in revenues.

SBA has designated that businesses with North American Industry Classification System (NAICS) code beginning with 72 (Accommodation and Food Services) qualify for a larger loan amount based on a calculation of 3.5x the average monthly payroll. 

The NAICS code included on your PPP application must match the code provided on your most recent IRS income tax filings in order to meet SBA requirements. Please review your business tax returns or consult with your accounting professional before applying if you believe your business is eligible for the larger 3.5x calculation. Only businesses which report a NAICS code beginning with 72 as its business activity code on its most recent IRS income tax return are eligible to use the 3.5x calculation.

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