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PP2 Relief Funds - Key Information - Second Draw Loans

Second Draw Loans 

"The Paycheck Protection Program (PPP) now allows certain eligible borrowers that previously received a PPP loan to apply for a Second Draw PPP Loan with the same general loan terms as their First Draw PPP Loan. "

For most borrowers, the maximum loan amount of a Second Draw PPP Loan is 2.5x average monthly 2019 or 2020 payroll costs up to $2 million.

For borrowers in the Accommodation and Food Services sector (use NAICS 72 to confirm), the maximum loan amount for a Second Draw PPP Loan is 3.5x average monthly 2019 or 2020 payroll costs up to $2 million.


A borrower is generally eligible for a Second Draw PPP Loan if the borrower: 

  • Previously received a First Draw PPP Loan and will or has used the full amount only for authorized uses
  • Has no more than 300 employees; and
  • Can demonstrate at least a 25% reduction in gross receipts* between comparable quarters in 2019 and 2020  (You must meet this test for at least one quarter to qualify.)

*How do I calculate the 25% Reduction?

From the application form instructions :

"In determining whether the Applicant experienced at least a 25% reduction in gross receipts, for loans above $150,000, the Applicant must identify the 2020
quarter meeting this requirement, identify the reference quarter, and state the gross receipts amounts for both quarters, as well as provide supporting

For loans of $150,000 and below, these fields are not required and the Applicant only must certify that the Applicant has met the 25% gross
receipts reduction at the time of application; however, upon or before seeking loan forgiveness (or upon SBA request) the Applicant must provide
documentation that identifies the 2020 quarter meeting this requirement, identifies the reference quarter, states the gross receipts amounts for both quarters,
and supports the amounts provided."

"For all loans, the appropriate reference quarter depends on how long the Applicant has been in operation:

• For all entities other than those satisfying the conditions set forth below, Applicants must demonstrate that gross receipts in any quarter of 2020 were
at least 25% lower than the same quarter of 2019.

Alternatively, Applicants may compare annual gross receipts in 2020 with annual gross receipts in
2019; Applicants choosing to use annual gross receipts must enter “Annual” in the 2020 Quarter and Reference Quarter fields and, as required
documentation, must submit copies of annual tax forms substantiating the annual gross receipts reduction.

  • Special rules apply to entities not in business for the full 2019 calendar year.

What is included in gross receipts?

Please note: Gross receipts do not include any prior loan proceeds  or PPP forgiveness income (including previous PPP loan funds.) 

"Gross receipts include all revenue in whatever form received or accrued (in accordance with the entity’s accounting method1) from whatever source:


  • Sales of products or services
  • Interest
  • Dividends
  • Rents
  • Royalties
  • Fees or commissions
  • Reduced by returns and allowances"

Not included in Gross Receipts are the following: 

"Generally, receipts are considered “total income” (or in the case of a sole proprietorship “gross income”) plus “cost of goods sold” and excludes net capital gains or
losses as these terms are defined and reported on IRS tax return forms."

Gross receipts do not include the following:

  • Taxes collected for and remitted to a taxing authority if included in gross or total income, such as sales or other taxes collected from customers and excluding taxes levied on the concern or its employees;
  • Proceeds from transactions between a concern and its domestic or foreign affiliates
  • Amounts collected for another by a travel agent, real estate agent, advertising agent, conference management service provider, freight forwarder or customs broker.

"All other items, such as subcontractor costs, reimbursements for purchases a contractor makes at a customer's request, investment income, and employee-based costs such as payroll taxes, may not be excluded from gross receipts.

"Gross receipts of a borrower must be aggregated with gross receipts of its affiliates.

For a nonprofit organization, veterans organization, nonprofit news organization, 501(c)(6) organization, and destination marketing organization, gross receipts has the meaning in section 6033 of the Internal Revenue Code of 1986."

What Expenses Are Covered? 

Round 2 of the PPP loans expanded the allowable expenses that can be paid with proceeds. 

Second PPP Loans can be used to help fund :

  • Payroll costs, including benefits
  • Mortgage interest
  • Rent
  • Utilities
  • Worker protection costs related to COVID-19
  • Uninsured property damage costs caused by looting or vandalism during 2020
  • Certain supplier costs and expenses for operation

Where do I apply? 

"Borrowers can apply for a Second Draw PPP Loan until March 31, 2021, through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, eligible non-bank lender, or Farm Credit System institution that is participating in PPP."


The Second Draw Application form is available from the SBA here

NOTE: Your basis of accounting is the basis used for either internal accounting or tax purposes (if different) but must be consistently applied to both 2019 and 2020. You can not use different methods of accounting to make the comparison. Please consult your advisor with any questions.