The Paycheck Protection Program (PPP) loans are opening back up for businesses that already received a PPP loan as well as businesses seeking their first PPP loan. The US Small Business Administration began accepting applications for first-time PPP loans (also called “first draw” PPP loans) on January 11, 2021, and they will begin accepting applications for second PPP loans (also called “second draw” PPP loans) on January 13, 2021.

To apply for either a first draw or second draw PPP loan, you will need to deal with your bank or credit union. Like last time, many banks are only issuing PPP loans to existing customers. To be matched with a bank in your area, you can use the Small Business Administration’s lender match tool.

To promote access for smaller banks and their customers, the SBA initially is only accepting loan applications from smaller banks like Community Development Financial Institutions. The SBA will begin accepting PPP loans from all other banks soon but has not announced a specific date at this time.

Eligibility for First Draw PPP Loans:

If your business has 500 or fewer employees and did not receive a PPP loan last year, you can apply for a First Draw PPP loan through any bank or credit union. Use Form 2483. The bank may have its own version of this form, but this is the basic information that will be required. The amount your business is eligible to receive for a First Draw PPP Loan is 2.5 times your average monthly payroll.

Eligibility for Second Draw PPP Loans:

If your business has fewer than 300 employees and you previously received a PPP loan, you can apply for Second Draw PPP Loan if you can demonstrate that your business had a 25% reduction in gross revenues from 2019 to 2020.­ This is calculated by comparing your company’s gross receipts from any one quarter of 2020 to the same quarter of 2019, or you can use your company’s 2020 tax return as compared to the 2019 return. You also must have spent your first PPP loan on eligible expenses. Use Form 2483-SD to apply for a Second Draw PPP Loan.

All PPP Loans:

  • Funding runs through March 31, 2021, or until the allocated funds run out.
  • Loans are forgivable and don’t have to be paid back if you spend at least 60% of the money on payroll costs. Like last time, payroll costs include salary/wages, health insurance, retirement, paid leave, and state unemployment taxes, but the list of allowable payroll costs has been expanded to include group health payments made by employers for vision, dental, disability, and life insurance for their employees.
  • You can spend the remaining 40% of your PPP loan on other business expenses: rent, utilities (including phone and internet bills), and mortgage interest.­ The list of allowable expenses under this category has also been expanded and now includes other business necessities like supplier costs for essential goods; worker safety protections related to COVID-19 like protective equipment or Plexiglas barriers; property damage from riots or protests; and certain other “back office” expenses like business software/computing, accounting, etc.
  • Like the original PPP loans, the amount of forgiveness will be reduced if you lay off employees or reduce employee salaries.