Second Draw Eligibility

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What are the eligibility requirements for Second Draw PPP loans?

Here are the general eligibility requirements for a Second Draw PPP loan:

  • You received a previous PPP loan
  • You must have used the full amount of your PPP loan for authorized uses by the disbursement date of your second draw PPP loan. Note: your loan does not need to be forgiven to qualify
  • You must have 300 or fewer employees
  • Your business must have experienced a revenue reduction of 25% or greater in any quarter of 2020 relative to 2019

Can I get a Second Draw PPP loan if I didn’t spend my First Draw loan?

Under the current rules as of 1/15/2021, you cannot receive a Second Draw loan unless you certify that you spent your First Draw loan on qualified expenses. The government wants to ensure you did not spend your First Draw loan on non-qualified expenses and they also don’t want you holding onto your First Draw loan and getting a concurrent Second Draw loan. We expect to see rule changes in this area soon.

Who is not eligible for a Second Draw PPP Loan?

An applicant is not eligible for a Second Draw PPP Loan, even if it meets the eligibility requirements if the applicant is:

 

  • Excluded from eligibility under the Consolidated First Draw PPP IFR;
  • a business concern or entity primarily engaged in political activities or lobbying activities, as defined in section 3 of the Lobbying Disclosure Act of 1995 (2 U.S.C. 1602), including any entity that is organized for research or for engaging in advocacy in areas such as public policy or political strategy or otherwise describes itself as a think tank in any public documents;
  • any business concern or entity:
    • For which an entity created in or organized under the laws of the People’s Republic of China or the Special Administrative Region of Hong Kong, or that has significant operations in the People’s Republic of China or the Special Administrative Region of Hong Kong, owns or holds, directly or indirectly, not less than 20 percent of the economic interest of the business concern or entity, including as equity shares or a capital or profit interest in a limited liability company or partnership; or 
    • that retains, as a member of the board of directors of the business concern, a person who is a resident of the People’s Republic of China;
  • any person required to submit a registration statement under section 2 of the Foreign Agents Registration Act of 1938 (22 U.S.C. 612);
  • any person or entity that receives a grant for shuttered venue operators under section 324 of the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act;
  • any entity in which the President, the Vice President, the head of an Executive department, or a Member of Congress, or the spouse of such person as determined under applicable common law, directly or indirectly holds a controlling interest in the entity, where:
    • ‘‘controlling interest’’ means owning, controlling, or holding not less than 20 percent, by vote or value, of the outstanding amount of any class of equity interest in an entity;
    • ‘‘equity interest’’ means:
      • A share in an entity, without regard to whether the share is transferable or classified as stock or anything similar;
      • a capital or profit interest in a limited liability company or partnership; or 
      • a warrant or right, other than a right to convert, to purchase, sell, or subscribe to a share or interest; 
    • ‘‘Executive department’’ has the meaning given the term in section 101 of title 5, United States Code;
    • ‘‘Member of Congress’’ means a Member of the Senate or House of Representatives, a Delegate to the House of Representatives, and the Resident Commissioner from Puerto Rico; and 
    • For the purpose of determining whether a person has a controlling interest in the entity, the securities owned, controlled, or held by the President, the Vice President, the head of an Executive department, or a Member of Congress, shall be aggregated with the securities held by his or her spouse as determined under applicable common law;
  • any issuer, the securities of which are listed on an exchange registered as a national securities exchange under section 6 of the Securities Exchange Act of 1934 (15 U.S.C. 78f), where the terms ‘‘exchange,’’ ‘‘issuer,’’ and ‘‘security’’ have the meanings given those terms in section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)) (except SBA will not consider whether a news organization that is eligible under subsection (c)(4) is affiliated with an entity, which includes any entity that owns or controls such news organization, that is an issuer); 
  • an entity that has previously received a Second Draw PPP Loan; or
  • an entity that has permanently closed.

Are Second Draw PPP Loans eligible for loan forgiveness?

Second Draw PPP Loans are eligible for loan forgiveness on the same terms and conditions as First Draw PPP Loans, except that Second Draw PPP Loan borrowers with a principal amount of $150,000 or less are required to provide documentation of revenue reduction if such documentation was not provided at the time of the loan application as specified in subsections (g)(2)(iv) and (v) of this section. 

How do SBA’s affiliation rules affect an applicant’s eligibility for a Second Draw PPP Loan?

Eligibility for Second Draw PPP Loans is governed by the same affiliations rules (and waivers) as First Draw PPP Loans.

 

The affiliation rules under 13 CFR 121.301(f) are waived with respect to eligibility for a Second Draw PPP Loan for:

  • Any business concern with not more than 300 employees that, as of the date on which the covered loan is disbursed, is assigned a NAICS code beginning with 72; and
  • any business concern (including any station which broadcasts pursuant to a license granted by the Federal Communications Commission under title III of the Communications Act of 1934 (47 U.S.C. 301 et seq.) without regard for whether such a station is a concern as defined in 13 CFR 121.105, or any successor thereto) that employs not more than 300 employees, per physical location of such business concern and is majority owned or controlled by a business concern that is assigned a NAICS code beginning with 511110 or 5151; or 
  • any nonprofit organization that is assigned a NAICS code beginning with 5151.