Paycheck Protection Program Resumes; SBA Vows to Improve Process

The Paycheck Protection Program (PPP) was reopened earlier this month by the U.S. Small Business Administration (SBA) in consultation with the U.S. Treasury Department.

The SBA website outlines details of what is required for First Draw PPP Loans, as well as the Second Draw PPP Loans for which the SBA began accepting applications on January 13. The application period continues until March 31.

In a Tuesday news release, the SBA said it is taking steps to improve the First Draw PPP loan review “so that small businesses have as much time as possible to access much-needed PPP funds.”

News reports said that bankers had encountered what was described as a “technical error” with the software portal that lenders must use to submit applications for businesses seeking PPP loans.

The SBA release said it would be hosting a national call to brief lenders on details of the program platform that will help resolve issues with First Draw PPP loan reviews and potential delays in approval of Second Draw loan applications. The SBA also will be providing information to SBA field team loan specialists and additional guidance to PPP lenders on the review and resolution process.

Second Draw PPP Loans

According to the SBA, 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.

Certain eligible borrowers that previously received a PPP loan may 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 also can 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.

For most borrowers, the maximum loan amount of a Second Draw PPP Loan is 2.5 times the 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 3.5 times the average monthly 2019 or 2020 payroll costs up to $2 million.


Generally, a borrower is 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.

The SBA posted a document on January 19 explaining how to support Second Draw PPP loans, calculate revenue reductions and what documentation to provide.

IRS Option

The Internal Revenue Service (IRS) has posted information on how businesses that asked for but didn’t receive PPP loan forgiveness can claim the Employee Retention Credit for 2020 when filing their quarterly Form 941 federal tax return. The IRS post cites a provision of the relief package approved by Congress in December 2020.