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SBA Releases Guidance on PPP Second Draw Loans

In new guidance, the U.S. Small Business Administration (SBA) announced that community lenders serving minority and women-owned businesses will have exclusive access to the second round of Paycheck Protection Program (PPP) loans for the first two days of the re-opened program. (Note: The SBA has not yet announced when the PPP will re-open.) The new guidance also places emphasis on companies with 10 or fewer employees or those in low-income areas. The guidance notes that there will also be $30 billion available to help boost capacity at lenders active in under-served areas—including community development financial institutions, minority depository institutions, and other small lenders.

As we mentioned when the Consolidated Appropriations Act, 2021 was signed into law, businesses will be able to apply for a second draw loan, but the rules were made stricter for second draw loans. Now, borrowers can have up to 300 employees—down from 500—and must have experienced a revenue decline of at least 25 percent in any quarter in 2020 compared to 2019. The maximum loan amount was also reduced, from $10 million to $2 million.

In a separate guidance document, the SBA details how businesses can calculate their 25 percent revenue loss—using gross receipts as the measure—to see if the business would be eligible for a second loan. The guidance also notes that applicants must have used the full amount of their first PPP loan on or before the expected date of the second PPP loan in order to qualify.

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