PPP2 Loans 2021: The Details

Millions of small businesses could soon apply for another forgivable federal loan as part of the rebooted Paycheck Protection Program (PPP).


  • A new round of Paycheck Protection Program (PPP) loans was authorized by the passage of H.R. 133: Consolidated Appropriations Act, 2021 into law on December 27, 2020.
  • First-Draw PPP loans are available for the lesser of $10 million or 2.5 times your average monthly payroll.
  • Second-Draw loans up to $2 million are available for businesses that have used funds in their Round 1 or Round 2 loan.
  • 100% of your loan could be forgiven if you follow guidelines.
  • Passage of the PPP Flexibility Act of 2020 relaxed many PPP loan guidelines.
  • Passage of the Consolidated Appropriations Act provided additional funding and even more relaxed guidelines.
  • You can apply for both a PPP and EIDL loan.
  • Check eligibility before you apply.
  • You can apply through any SBA approved lender.

PPP was revived along with other small business benefits upon the passage of the government’s $900 billion coronavirus-related stimulus package. The loans are initially available to institutions that provide funding for small businesses in underserved communities, but other small businesses can expect to access the loans in the next week or so.

“This updated guidance enhances the PPP’s targeted relief to small businesses most impacted by COVID-19,” Treasury Secretary Steven Mnuchin said in a statement. “We are committed to implementing this round of PPP quickly to continue supporting American small businesses and their workers.”

I am a first-time small business applicant. Do I qualify?

In order to be eligible for a loan, first-time borrowers must have been operating a business on February 15, 2020, and belong to one of the following groups: businesses with 500 or fewer workers that are eligible for other SBA 7(A) loans; sole proprietors, independent contractors, and self-employed individuals; nonprofits (including churches); accommodation and foodservice operations with North American Industry Classification System (NAICS) codes starting with 72 that have under 500 employees per location; Sec. 501(c)(6) business leagues; and some news organizations and nonprofit public broadcasting entities with no more than 500 workers per location.

Can my business get a second PPP loan?

Businesses that received funding as part of the CARES Act can still apply for a second PPP loan. Their eligibility will depend on whether they have 300 or fewer employees; have used or will use the full amount of their first PPP loan on or before the date the second PPP loan is distributed to the borrower and have experienced a 25% or more decline in gross receipts in all or part of 2020.

What is the maximum loan amount?

Both first- and second-time PPP borrowers can receive a loan of up to 2.5 times their average monthly payroll costs, with a cap of $100,000 per worker. For first-time borrowers, the maximum loan amount is $10 million, while second-time borrowers are capped at $2 million.

How can my business meet eligibility requirements for full loan forgiveness?

All loans will be forgiven if they are used on eligible costs, such as payroll, rent, mortgage, and utilities, as well as covered operations expenditures, covered property damaged costs, covered supplier costs, and covered worker protection expenditures. Borrowers are also required to spend at least 60% of PPP funding on payroll costs to receive full loan forgiveness.

Additional Second-Draw Requirements

Second-draw PPP loans have some restrictions that first-draw loans do not. You cannot receive a second-draw loan of up to $2 million unless:

  • You have received and used (or will use) all proceeds from a first-draw loan by the time you receive (or expect to receive) second-draw loan proceeds.
  • You have 300 or fewer employees.
  • You can demonstrate that you experienced a loss of at least 25% of gross receipts in any quarter during 2020 compared to the same quarter in 2019.
  • You spend all proceeds from your first-draw loan on eligible expenses.

Second-Draw Borrower Exclusions

You are excluded from a second-draw loan if your company:

  • Is permanently closed.
  • Is ineligible under existing SBA regulations.
  • Is primarily engaged in lobbying or other political activities.
  • Is owned by an entity created in, or with significant operations in, the People’s Republic of China or the Special Administrative Region of Hong Kong.
  • Includes a board member who is a resident of the People’s Republic of China.
  • Is a recipient of a shuttered venue operator grant under Section 24 of the Act.

Required Certifications for PPP Loans

You must certify that current economic uncertainty makes this loan request necessary to support ongoing operations and that funds will be used as required, including no more than 40% for non-payroll costs. This requirement applies to both first- and second-draw PPP loans.

Application Deadline

The Consolidated Appropriations Act, 2021 (CAA) extends the Paycheck Protection Program (PPP) through March 31, 2021, or until funds are depleted. The amount of funds currently available is $284 billion. Maximum loans of $10 million will be available to first-draw borrowers, and loans of up to $2 million are being offered to second-draw, small business owners. 4

How to Apply for a PPP Loan

New first- and second-draw loans will follow a pattern like that of previous PPP loans. Start by downloading and filling out a loan application from the SBA website. The first-draw application is five pages long, including instructions, and the second-draw application is six pages, including instructions.

Choose Your Own Covered Period

Initially, PPP loans required the time during which you had to use your loan proceeds (covered period) was an eight-week period beginning on the date you received them. That was later expanded to 24 weeks.

Presently you are allowed to choose any length period between eight weeks and 24 weeks, giving you more control over how to handle reductions in your workforce if needed once PPP funds are depleted.

Use of Funds 

The CAA expands the types of expenses for which you can use the PPP funds. This also applies to existing PPP loan funds (unless you have already obtained forgiveness). In addition to payroll, rent, covered mortgage interest, and utilities, the Paycheck Protection Program will now let you use loan proceeds for, (60% the percentage of both first and second-draw PPP loans that must be used for payroll expenses) :

  1. Certain operations expenses, including business software; business-related cloud computing services; product or service delivery; payroll processing, payment, and tracking costs; HR and billing functions; and tracking of supplies, inventory, records, and expenses.
  2. Covered property damage costs, including costs related to damage or vandalism caused by looting or public disturbances in 2020 that were not covered by insurance or other compensation.
  3. Listed supplier costs, including payments to a supplier of goods that are essential to operations and made pursuant to a contract or order in effect at any time before the covered period or, with respect to perishable goods, in effect at any time during the covered period.
  4. Covered worker protection expenses, including operating or capital expenditures required to comply with requirements or guidance issued by the CDC, HHS, OSHA, or any state or local government during the period beginning March 1, 2020, and ending on the date when the national emergency expires

Tax Treatment of PPP Loans

PPP loans will not be included in your company’s taxable income. If your loan is forgiven, expenses paid with the proceeds of your loan will be tax-deductible. Furthermore, this rule applies to new, existing, and previous PPP loans. In addition, any income tax basis increase that results from your PPP loan will remain even if the PPP loan is eventually forgiven.