How much can I borrow for a Paycheck Protection Program loan? (2021 updates!)


Congress has approved an extension of the PPP loan program until June 30, 2021, including “second draw” PPP loans for businesses that received PPP funding in 2020.


In this 2-minute read: 

  • How much can my business borrow under the SBA’s Paycheck Protection Program?
  • How much can I borrow for a second draw PPP loan in 2021?
  • Additional PPP and small business resources during COVID-19

The federal government has allocated $2 trillion under the new CARES Act. This money is intended to help individuals, families, and businesses through the financial challenges of the COVID-19 pandemic. 

On June 5, 2020, President Trump signed into law new updates to PPP loan forgiveness requirements, extending the covered period to 24 weeks, reducing the minimum loan funding that must be spent on payroll to 60%, and easing the requirements for maintaining staffing and compensation levels. Please read the details here.

The Paycheck Protection Program (PPP)—the part of the CARES Act that’s dedicated to the support of small businesses—allows qualifying businesses to apply for loans to help them get through the next couple of months. 

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How much can my business borrow for a PPP loan?

The Small Business Administration (SBA) states that for first-time PPP loans, small businesses (and sole proprietorships, independent contractors, and qualifying self-employed individuals) can borrow 2.5 times their average monthly payroll costs. However, that number cannot exceed $10 million, and employee salaries over $100K per year are capped at that amount when determining your payroll and for loan forgiveness. 

Second draw PPP loans and new rules for 2021

Since America’s small businesses are still in dire straits due to the devastating impact of the ongoing COVID-19 pandemic, the SBA is allowing some first-time recipients to apply for a second round of PPP loan funding. However, not ALL businesses that got PPP funding in the first round will be eligible for a second-draw PPP loan.

Second draw PPP loan qualification and exclusions

In order to qualify for application for a second-draw PPP loan, your business:

  • Can’t have more than 300 employees, and
  • Must be able to demonstrate a 25 percent or greater reduction in revenue in 2020 vs. 2019, and
  • Has received a “first draw” PPP loan and has used, or will use, the full amount of the initial PPP funding on or before the expected date on which the Second Draw PPP Loan is disbursed to you, and
  • Has used the full amount of your first PPP Loan on eligible expenses under the PPP rules

What’s the maximum amount I can borrow for a second draw PPP loan?

IN GENERAL the maximum loan amount for a Second Draw PPP Loan is equal to the lesser of: A. two and half months of the borrower’s average monthly payroll costs; or B. $2 million. Obviously the intent here is to prioritize smaller businesses without millions of dollars of payroll costs.

IMPORTANT NOTE: For “SECOND DRAW” PPP borrowers in accommodation and food services sector (NAICS 72, full list here), maximum loan amount is increased to 3.5x average monthly 2019 or 2020 payroll.

Read more about second draw PPP rules here.

What determines how much my business can borrow for a PPP loan?

This average monthly payroll used in determining your maximum PPP loan amount is determined by your payroll costs over the past year and averaged out. For a deeper look at how this number is calculated, read our full article about how to calculate your average monthly payroll for PPP loans

Independent contractors, self-employed individuals, and sole proprietors can also apply for PPP loans, but the treasury department has issued some additional clarifications and requirements for these loans, which you can learn about here.

In order to borrow this sum of money, you must also be able to certify in good faith that you will be using 60% (previously 75%) or more of your loan to go towards maintaining your employee headcount and compensation levels, and keeping up with payroll expenses. 

Go deeper: How your business should spend your Paycheck Protection Program or SBA relief money

Read our complete PPP FAQs here.

Additional PPP resources

If you have more questions about PPP loans and how to navigate through the application process, check out these additional resources:

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