SBA Releases Guidance for Second Draw Loans

January 7, 2021

On January 6, 2021, the U.S. Small Business Administration (SBA) issued the Interim Final Rule on Second Draw Loans (the IFR). The IFR announces the implementation of section 311 of the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (the Economic Aid Act), a component of the Consolidated Appropriations Act, 2021 (the Act), which authorizes the SBA to guarantee additional loans under the Paycheck Protection Program (PPP).

The Economic Aid Act provides that a borrower is eligible for a Second Draw PPP Loan only if it has 300 or fewer employees* and experienced a reduction in gross receipts in any quarter in 2020 compared to that same quarter in 2019. *Exceptions in employee numbers apply for businesses with a NAICS Code beginning with 72.

A Second Draw PPP Loan may be granted to an eligible borrower that (i) received a First Draw PPP Loan and (ii) used, or will use, the full amount of the First Draw PPP Loan on or before the expected date on which the Second Draw PPP Loan is disbursed to the borrower.

The IFR addresses several questions including, but not limited to, the following:

  • Who is and is not eligible for a Second Draw PPP Loan?
  • How do SBA’s affiliation rules affect an applicant’s eligibility for a Second Draw PPP Loan?
  • What is the maximum loan amount for a Second Draw PPP Loan?
  • How do I submit an application for a Second Draw PPP Loan and what documentation must I provide to demonstrate eligibility?
  • What do lenders need to know and do?
  • Will an applicant’s Second Draw PPP Loan application be affected if there are unresolved issues regarding the applicant’s First Draw PPP Loan?
  • Are Second Draw PPP Loans eligible for loan forgiveness?

What’s Next

Aprio anticipates further instructions for borrowers and lenders to be provided in the form of FAQs and Procedural Notices as well as the Paycheck Protection Program Second Draw Application Form (SBA Form 2483-SD).

Let Aprio Help

Aprio has established a dedicated PPP team that is continuously monitoring new guidance from the SBA, as well as the Treasury, Congress and the IRS, to ensure we have the latest information when advising our clients.

To discuss how to determine your eligibility for a Second Draw PPP Loan and accurately calculate your borrowing capacity, contact Aprio’s dedicated PPP team.

Disclaimer for services provided relative to SBA programs and the CARES Act

Aprio’s goal is to provide the most up to date information, along with our insights and current understanding of these programs and regulations to help you navigate your business response to COVID-19.

The rules regarding SBA programs are constantly being refined and clarified by the SBA and other agencies In certain instances, the guidance being provided by the agencies and/or the financial institutions is in direct conflict with other competing guidance, regulations and/or existing laws.

Due to the evolving nature of the situation and the lack of final published rules, Aprio cannot guarantee that additional changes or updates won’t be needed or forthcoming and the original advice given by Aprio may be affected by the evolving nature of the situation.

You need to evaluate and draw your own conclusions and determine your Company’s best approach relative to participation within these programs based on your Company’s specific circumstances, cash flow forecast and business strategy.

In situations where resources are provided by third parties, those services should be covered under a separate agreement directly with that service provider. Aprio is not responsible for the actions of any other third party.

Aprio encourages you to contact your legal counsel to address the legal implications of the impact of the CARES Act and specifically your participation in any of the SBA programs.

Recent Articles

About the Author

Justin Elanjian

Justin Elanjian, CPA, is the Partner-in-Charge of Aprio’s Paycheck Protection Program (PPP) & Employee Retention Credit (ERC) Services. As a national PPP expert, prominent speaker and strategic business advisor, Justin helps both lenders and borrowers navigate the complexities of the PPP. He also helps his clients realize benefits from other stimulus package programs, such as the ERC, and is committed to strengthening his clients’ balance sheets and helping them achieve what’s next. Justin also leads a team of more than 50 professionals who share his passion for helping businesses maximize the federal COVID relief programs.