The Paycheck Protection Program (PPP) has been extended for additional loans by the Small Business Administration (SBA) for eligible organizations as part of the Consolidated Appropriations Act, 2021 (CAA).
The PPP loan was originally created as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act in 2020. With the new legislation, if your organization previously received a PPP loan, you can now apply for a Second Draw PPP Loan with the same general loan terms, including the possibility that the loan may be forgiven.
However, not all organizations will qualify for this second draw loan. There are new, more stringent requirements to show that your organization experienced a financial loss in 2020 that were not required for the initial PPP loan.
Organizations that have not previously applied may still be eligible for a First Draw PPP Loan. If you are curious about applying for a Paycheck Protection Program loan, check out our previous article that includes suggestions for applying.
Nonprofits And Churches That May Qualify For A Second Draw PPP Loan
In general, an organization is eligible for a Second Draw PPP Loan if it meets all of the following criteria:
- Previously received a First Draw PPP Loan, and have used or will use the entire amount for authorized uses by the time you receive or expect to receive the Second Draw PPP Loan
- Have 300 or fewer employees
- Can show at least a 25% loss in gross receipts between comparable quarters in 2019 and 2020
To demonstrate that you have experienced a loss in gross receipts, you can create a comparative income statement period report in Aplos. You can view the required profit and loss information and see if your organization meets the 25% loss required. In the sample report below, you can see that Example Organization’s gross income in the first quarter of 2020 is 60% of what it was in the same quarter in 2019. This shows a 40% loss, which is higher than the minimum 25% to qualify for the PPP loan.
Reach out to your SBA lender to confirm the exact reporting required to apply for a second draw loan. You should also be aware of certain exclusions, such as the disqualification of organizations that are permanently closed. Additional exclusions apply. See the SBA website for more details.
Calculating Your Second Draw Loan Amount
Most eligible organizations can apply for a second draw loan amount of 2.5 times their average monthly 2019 or 2020 payroll costs, up to $2 million. Organizations can use the loans for payroll costs, including benefits, rent, mortgage interest, utilities, and more. See the SBA website for details.
Visit the SBA website to find a lender and apply for the loan. All Second Draw PPP Loans have the same terms, regardless of your organization or which lender you use. The application window closes March 31, 2021.
Loan Forgiveness For Second Draw Loans
If your organization follows all the forgiveness terms, including spending at least 60% on payroll during the covered period of 8 to 24 weeks after receiving your loan, the entire amount of the loan could be forgiven. Otherwise, the interest rate is 1% and the loan matures in five years.
The good news is that the SBA has streamlined the process for loan forgiveness for organizations that have small loans. If your loan amount is $150,000 or less, you may be able to use the shortened loan forgiveness form. For additional information on how to calculate your eligible expenses and apply for loan forgiveness, contact your lender or consult with a professional accountant.