January 19, 2021 Update:

• SBA Procedural Notice on PPP Excess Loan Amount Errors: Click Here to Read
  
• How to Calculate Revenue Reduction and Maximize Loan Amounts Including What Documentation to Provide: Click Here to Read

The U.S. Small Business Administration (SBA) and Treasury have provided more detail on the second round of PPP loans.

Loan Calculation

The maximum loan size for the “second draw” PPP loan is $2MM. Loan amounts can be calculated by 2.5 times the monthly average payroll costs for 2019, 2020 or the 12 month period prior to application. Businesses that fall within NAICS Code 72 are eligible to borrow up to 3.5 times their monthly average payroll costs.

Eligibility

We understand that in order to be eligible, a business must have fewer than 300 employees, and a 25% gross revenue decrease in a calendar quarter compared to the same calendar quarter the prior year. Businesses that fall within NAICS Code 72 are eligible for up to 300 employees per location.

Payroll documentation requirements

We expect that no additional documentation to substantiate payroll costs will be required if the applicant:

• used calendar year 2019 figures to determine its First Draw PPP Loan amount
• used calendar year 2019 figures to determine its Second Draw PPP Loan amount (instead of calendar year 2020)
• the lender for the applicant’s Second Draw PPP Loan is the same as the lender that made the applicant’s First Draw PPP Loan

Note: Lenders may request additional documentation if needed in conducting a good faith review.

Gross receipts reduction of 25% or more documentation requirement

It will be required to certify the necessity of the loan. In the first round of PPP loans, the SBA provided a loan necessity questionnaire for this purpose.

• For loans with a principal amount greater than $150,000, the applicant must submit documentation adequate to establish that the applicant experienced a revenue reduction of 25% or greater in 2020 relative to 2019.
• For loans with a principal amount of $150,000 or less, such documentation is not required at the time of application, but must be submitted on or before the date the borrower applies for loan forgiveness.

Newer Business Eligibility

For those not in business for part of 2019 or 2020, the SBA has released specific guidance for how to calculate gross receipt reductions. Please reach out to your MCM relationship contact to learn more about newer business eligibility.

Learn More about the SBA Guidance

Additional information about eligibility and gross receipts can be found here: IFR PPP Second Draw Loans

We’re here to help.

For more information on the second round of PPP loans and how you can prepare, please reach out to your MCM relationship contact or email us at covidbank@mcmcpa.com.