Should I Take Out A Second PPP Loan?

With the recently-passed second economic stimulus bill, many small business owners had one key question: Can I apply for a PPP loan?

During the first round of Paycheck Protection Program loans issued in 2020, some small businesses missed out on funding, or the funds they received didn’t quite stretch far enough. Now, there’s another opportunity to receive this much-needed forgivable loan and boost your business in 2021.

Now that the U.S. Small Business Administration is accepting applications for the second round of PPP loans, you may be wondering if you’re eligible to apply. Here’s what you need to know about applying and receiving a loan under the new stimulus bill.

Who is eligible for a PPP loan?

In case you were wondering, the answer is yes — you can in fact apply for another PPP loan if you received one last year.

Any small business (300 employees or less) that was opened before February 15, 2020, remained open and operational throughout the pandemic, and lost 25% or more in quarterly sales (compared to the same quarter in 2019) is eligible to apply for a PPP loan under the new stimulus bill.

There’s a catch, though: You can only apply for a second PPP loan if you have used or will use all of your original loan and had it forgiven under the original CARES Act.

Should my business apply?

Congress’s bill designated $137 billion for “second draw” PPP loans, so if your business is eligible, it’s strongly advised to take advantage of this second chance at much-needed financial relief. We believe the SBA will provide further guidance throughout the application period and help businesses overcome any major hurdles to receive the money they need to stay afloat in early 2021.

When applying for your second PPP loan, we recommend returning to your original lending institution. Because you already have an existing lending relationship, you’ll improve your chances at approval.

Is there anything different about a second draw PPP loan?

If you received an initial PPP loan, then you already know the drill: Second draw loans will have the same terms as the original PPP loan.

This means that minimally 60% of the funds you receive must be spent on payroll to qualify for loan forgiveness. The rest must go toward other eligible expenses such as rent, utilities, and other operating costs.

Most eligible second-draw borrowers can apply for a loan of up to 2.5 times their average monthly payroll costs, with exceptions for seasonal businesses (2.5 times their average monthly payroll for any 12-week period between February 15, 2019 and February 15, 2020) and food and accommodation businesses, which can borrow up to 3.5 times their average monthly payroll for their second PPP loan.

How will this impact my taxes?

If you’re unsure of how a second (or first) PPP loan might impact your taxes next year, it’s a good idea to speak with a trusted financial advisor to help you properly plan out your finances. The experts at Miller and Company are here and ready to help. Schedule your consultation today.

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