The Second PPP Loan: What You Need to Know

On December 27, a new COVID relief bill was signed changing the Paycheck Protection Program (PPP). The highlight? Some businesses will be eligible for a second PPP loan. Here’s what you need to know.



What’s updated for the second round of PPP?

If you did not receive a PPP loan in 2020, you are eligible to apply for your first PPP loan in 2021.

If you received a PPP loan in 2020, you may be eligible to apply for a second PPP loan if your business suffered a loss in revenue in 2020.

Whether you now take your first or second PPP loan, these loans will have the same terms as the original PPP loan.

This means, like the first PPP loan, the second round of PPP loans will also be fully forgivable if you follow the forgiveness guidelines. At least 60% of the loan must be spent on payroll and the rest spent on other eligible expenses.

If the loan is not forgiven, these loans would have an interest rate of 1% and a term of five years. Loan payments are deferred for 10 months after the covered period ends or when you receive a forgiveness verdict, whichever comes first.

Who is eligible for a PPP loan in 2021?

First draw PPP loans

If the following statements apply to your business, you are eligible to apply for your first PPP loan in 2021.

  • Your business was operational before February 15, 2020
  • Your business is still open and operational
  • You have no more than 500 employees
  • If your business has multiple locations, you have no more than 500 employees per location

Second draw PPP loans

If the following statements apply to your business, you are eligible to apply for your second PPP loan in 2021.

  • You have used up your first PPP loan
  • Your business was operational before February 15, 2020
  • Your business is still open and operational
  • You have no more than 300 employees
  • If your business has multiple locations, you have no more than 300 employees per location
  • You can show a 25% or greater reduction in gross revenue

Further reading: How to Apply for Your Second PPP Loan

Showing a 25% or greater reduction in revenue

A 25% or greater reduction can be shown in one of two ways:

  • Comparing your annual gross revenue as reported on your tax return between 2020 and 2019
  • Comparing your gross revenue in any quarter in 2020 with your gross revenue in the same quarter of 2019

For example, if a business wants to use the second quarter (Q2) of 2019 where they recorded $20,000 in gross revenue, they are eligible if their Q2 2020 gross revenue was $15,000 or less.

Further reading: How to Calculate a 25% Reduction in Revenue for PPP 2

When do PPP applications open again?

On January 6, 2021, the SBA released two sets of guidance: one for first draw PPP loans and another for second draw PPP loans.

With the release of this guidance, we are now waiting for lenders to open their application portals. Lenders are expected to be ready to take applications starting as early as next week.

PPP loan amount calculation

The PPP loan amount will be calculated very similarly to the original PPP loan calculation. You are eligible for a loan equal to 2.5 times your average monthly payroll costs. Your average monthly payroll costs can be calculated using one of the following:

  • the one year period before the loan application
  • the calendar year of 2020
  • the calendar year of 2019

However, there are some exceptions to the loan amount calculation for certain businesses.

Food and accommodation businesses

Special consideration was given to the food and accommodation industries. Any business with a NAICS code beginning with 72 is eligible for a greater loan amount.

Businesses in these industries are eligible for a loan equal to 2.5 times your average monthly payroll costs. The average monthly payroll cost is calculated the same: using the one year period before application, the calendar year of 2020, or the calendar year of 2019.

For these businesses, you are eligible for 3.5 times your average monthly payroll costs for your second draw PPP loan only.

Seasonal businesses

To qualify as a seasonal business, you must satisfy one of the following criteria:

  • You do not operate for more than seven months in any calendar year

  • During the previous calendar year, your gross receipts for six of the 12 months were no more than 33.33% of your gross receipts from the remaining six months (e.g. if you earn $100,000 from January through June, you earn no more than $33,330.00 from July through December)

Seasonal businesses are eligible for loans equal to 2.5 times their average monthly payroll cost. But the average monthly payroll cost can be calculated using any 12-week period between February 15, 2019 and February 15, 2020.

This is the same for businesses applying for their first or second PPP loan.

Sole proprietors, partnerships and independent contractors without payroll

Sole proprietors and independent contractors are eligible for loans equal to 2.5 times their average monthly net income from 2019 or 2020. The monthly net income is found by dividing the net income as reported on line 31 of a 2019 or 2020 Schedule C by 12.

Partnerships are eligible for 2.5 times their average monthly distributions. Their average monthly distributions is calculated by taking their distributions from their 2019 or 2020 Schedule K-1, multiplying it by 0.9235, then dividing by 12.

The expansion of PPP eligible expenses

For the first rollout of PPP loans in 2020, the eligible expenses included payroll costs, rent, and utilities expenses.

The second stimulus bill has expanded on the eligible expenses you can use your PPP loan for. These new expenses include:

  • Operations expenditures: Any software, cloud computing, or other human resources and accounting needs (like Bench).

  • Property damage costs: Any costs from damages due to public disturbances occurring in 2020 and not covered by insurance.

  • Supplier costs: Any purchase order or order of goods made prior to receiving a PPP loan essential to operations.

  • Worker protection expenditures: Any personal protection equipment or property improvements to remain COVID compliant from March 1, 2020 onwards.

These new eligible expenses now apply to all PPP loans, including those obtained prior to August 8, 2020.

Requesting an increase in your previous PPP loan amount

A request for an increase in your previous PPP loan amount will be made available to some borrowers. It will be open to businesses that did not take the full loan amount or returned a portion of their first loan—so long as they haven’t already applied for forgiveness.

This will allow businesses to receive the difference between their original loan offer and what they ended up taking.

For example, if a business was eligible for $20,000 but only took $15,000, they can apply to receive the $5,000 they previously opted not to take.

As of now, it’s unclear what this request process will look like. The SBA guidance released on January 6, 2020 did not provide details on the process. This process may vary from lender to lender. Check in with your original PPP loan lender for more information.

More PPP resources

What’s Bench?

We’re an online bookkeeping service powered by real humans. With Bench, you get a dedicated bookkeeper and powerful reporting software for a crystal clear view of your financial health. All of our services are eligible expenses for PPP forgiveness, and we’ll even provide support in applying for the PPP (or getting that loan forgiven). Whatever happens next, we’re right there with you. Get started on a free trial today.


This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. Bench assumes no liability for actions taken in reliance upon the information contained herein.

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