Paper Trails

PPP 2nd Draw – What you need to know!

2nd Round Basics

The SBA has released details on the 2nd Draw PPP program. The program goes live Monday 1/11 for first time borrowers, and Wednesday 1/13 for 2nd Draw borrowers who use community banks. National banks will be able to start accepting applications beginning the following Monday 1/18.

  • The second round is very similar to round 1
  • Eligibility requirements are more
    strict and require revenue drop
  • The 2nd round loans are more favorable to hospitality
  • Forgiveness has been expanded to allow for more purchases/expenses to be included
  • It is a good idea to have Round 1 loan forgiven before applying for 2nd draw
  • Maximum Loan size is now $2 million vs $10 million
  • First time borrowers can apply
    Monday, January 11th
  • Borrowers who use a community
    bank can apply Wednesday,
    January 13th
  • Borrowers using a national bank can apply Monday, January 18th

2nd Round Eligibility

You are eligible to apply for a 2nd draw PPP loan if:

  • Your business (or aggregate group) employees less than 300 employees
  • You must be able to demonstrate a 25% reduction in gross receipts in any given quarter of 2020
  • Example: Q2 2020 to Q2 2019
  • Use Quickbooks P&L Previous Year Comparison Report to do this sales calculation

How to Calculate Your Loan Amount

Now you know you’re eligible. You can calculate how much you’re eligible for the 2nd round loan.

  • The loan is based on your average monthly payroll costs
  • Your loan will be 2.5x your average monthly payroll
  • Exception: if your NAICS code begins with 72 (hospitality), you loan will be 3.5x your average monthly payroll
  • Total payroll costs include:
  • Wages, tips, commissions, bonuses
  • Wages capped at $100k per employee
  • Non-US employee wages exempt (J1/H2B)
  • State unemployment tax paid
  • Retirement contributions (SIMPLE IRA, 401k, etc)
  • Any insurance benefit company contribution (now includes health, dental, vision, etc)
  • You can use total payroll costs for either 2019 OR 2020 – whichever is more beneficial to you

How to apply!

Once you’ve gathered all of the required paperwork and done the calculations described above, you can apply!

  • Do your loan calculation – use our spreadsheet
  • Gather copies of payroll reports used to produce calculations
  • Gather quarterly payroll tax returns for year used
  • Gather sales reports used to justify application (loans <$150k not required until forgiveness)
  • Complete application (available on our website or SBA website)
  • Submit complete package to your bank.

How long do I have to use these funds?

Your PPP period:

  • Begins on the funding date of loan
  • Ends 168 days (24 weeks) later
  • Loans and forgiveness are on a “Cash Basis” – whenever the check is written, not “earned”

Alternative Payroll Covered Period

  • For administrative convenience…
  • PPP period may begin with the first day of the pay period immediately following funding & extend 168 days

What can I use these funds for?

To ensure full forgiveness:

  • You MUST spend 60% of funds on Payroll
  • Wages, tips, commissions, bonuses, etc
  • State unemployment, Retirement & Insurances
  • Wages paid over $100k are excluded
  • Rent or Mortgage Interest
  • Utility Payments
  • Interest payments on any other debt incurred before 2/15/20
  • Operations Expenditures
  • Property Damage related to vandalism or looting in 2020
  • Supplier costs for goods that are essential to business
  • Worker protections/PPE

What does this forgiveness process look like?

  • No new forgiveness applications have been released yet
  • Similar process
  • New “streamlined” application for loans under $150,000
  • You can apply at any time after funds have been spent
  • Tax handling has changed – expenses are now deductible
  • Essentially a tax-free grant – Thank you Uncle Sam!
  • State income tax will still apply! Auntie Janet will take her piece!
  • Paper Trails will again help you apply for forgiveness


  • Paper Trails will help clients pull reports and calculate loan amounts at no cost for second draw loans.
  • When you’re ready to calculate forgiveness and apply for forgiveness, Paper Trails will complete all forgiveness paperwork on your behalf just as we did last year for $350.