PPP Round 2: How To Apply For A First Or Second Draw PPP Loan

As a small business owner, the effects of COVID-19 probably hit close to home. Whether you’ve shuttered your business because of state laws or have had a decrease in revenue due to fewer customers, businesses worldwide are facing financial challenges as a result of this pandemic. In the United States, President Donald Trump has taken steps to help small business owners through this challenging time, such as the passage of the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March 2020. A provision in the CARES Act was the Paycheck Protection Program, which provided eligible small business owners with forgivable loans up to $10 million.

Funds from the first round of funding were depleted, but fortunately, additional help arrived when a new COVID relief package was signed into law on December 27, 2020. This package includes $284 billion to fund a second round of the PPP. Beginning the week of January 11, 2021, eligible small business owners can now apply for additional financial relief.

Whether you missed out on the first round or you were able to get much-needed funding for your business last summer, this post is for you. This article focuses on the newly-reopened PPP and what steps to take to get funded. If you own a small business and have employees on your payroll, the PPP loan may benefit you. Keep reading to learn more about this program, how to know if you qualify, and how to navigate the application process with ease.

How To Apply For A PPP Loan

Does a PPP loan sound like it would take some of the financial burden off your business? If so, the next step is to submit your application. Unsure of where to begin? Keep reading for a step-by-step guide on how to apply for PPP second draw funding.

1) Make Sure You Qualify

While a PPP loan may be easier to obtain than a traditional loan, you still must meet certain requirements to qualify. All businesses can apply for this loan, provided they meet the size standards set by the SBA.

For-profit businesses, nonprofit organizations, independent contractors, sole proprietors, and other businesses may apply for the PPP loan. To qualify for loan forgiveness, you must maintain your payroll and number of employees and use your loan for a qualifying purpose. You will need to certify through good faith that you will use the loan for its intended purpose and that your business needs loan funds during this time of economic uncertainty.

PPP loans are available to businesses that were in operation prior to February 15, 2020. Publically-traded companies and businesses that have significant operations with the People’s Republic of China are ineligible to apply for a second PPP loan.

Unsure if you qualify for a second PPP loan? Check out all of the rules and requirements for PPP round 2 before you apply.

2) Find A Lender

Once you’ve determined that you qualify for a PPP loan, the next step is to select your lender. You can apply through an SBA lender or a federally insured financial institution, including credit unions. Other regulated lenders may also offer the PPP loan. Start with any financial institution you already use. Even if the PPP loan isn’t offered, they may be able to point you in the right direction. You can also use the SBA’s Lender Match tool to find an SBA lender online or in your area.

You don’t even have to leave your home or office to apply for a PPP loan.

3) Complete Your Application

Once you’ve found a lender, you’ll be asked to complete the PPP loan application. It’s important to note that there are two applications based on whether you’ve previously received a PPP loan. We’ll go more into the two applications in a later section.

Both PPP applications are pretty short and straightforward. You will be required to provide some basic information about your business, including your business’s legal structure, average monthly payroll costs, and information for all owners with at least a 20% stake in the business. You must also state the loan’s purpose and answer several questions that will determine if your business is eligible for funding.

In addition to your application, you must also submit payroll documentation. This payroll documentation should back up the numbers from your application to determine if you qualify for a PPP loan and how much you qualify to receive. You should also make sure you have other documentation on hand that may be required by your lender. This includes but is not limited to tax documents, employee W-2s, organizational documents, and government-issued identification.

4) Keep In Touch With Your Lender

While you wait for your loan decision, it’s important to keep in touch with your lender. Additional information or documentation may be required as your loan is being processed, so be on the lookout for emails or phone calls requesting this information. Failure to communicate with your lender promptly can cause delays in the application process and receiving your funds.

How To Apply: First VS Second Draw

There are a few different rules for first-time PPP borrowers and businesses that are taking a second draw.

When applying for a PPP loan, make sure to use the correct application. The SBA has issued two separate applications. Form 2483 is for first-time borrowers that have not previously received PPP funds. Form 2483-SD is the application for borrowers applying for a second draw.

Borrowers that have already received a PPP loan may qualify for a second loan as long as certain conditions are met. In addition to meeting the requirements that were in place when the first loan was received, second-time borrowers must also meet additional requirements. These include:

• Funds From The First Draw: To qualify for a second draw, borrowers must have already used or plan to use all funds from their first draw.
• Employees: Second-time borrowers must have 300 or fewer employees.
• Reduction In Gross Receipts: To receive a second loan, a business must demonstrate a reduction of at least 25% in gross receipts for comparable quarters in 2019 and 2020.

If you previously applied for a PPP loan and returned all or a portion of the funds, you may be eligible to reapply for a first draw. If you did not accept the full amount of your first draw, it may be possible to modify your first draw application. If either of these scenarios applies to you, discuss your options with your lender.

Borrowers who have already received PPP funds may opt to use the same lender as before or choose another qualified lender for a second draw.

For more details about the differences between funding amounts and borrower requirements, check out our article, PPP Round 2: Main Differences Between The First & Second Round Of PPP Funding.

Avoid These Common PPP Loan Application Mistakes

From falling for scams to submitting an application with inaccurate information, there are a few mistakes that could delay the processing of your loan or even put your identity and bank account at risk. Here’s what to look out for.

Don’t Just Bet On The Big Banks

It may be tempting to rush to the nearest bank to apply for your PPP loan. While you certainly can apply with the big players, borrowers are finding that working with smaller lenders is easy and funding is fast. Check with your local small banks and credit unions — or even give an online marketplace a try — to find the right lender for you.

Beware Of PPP Scams

While the PPP application process is quite easy and quick compared to other SBA loans, there are scammers out there looking to take advantage of small business owners. Beware of shady lending websites that promise faster funding. You should only work with a reputable lender, so do your research before handing off your personal information.

Also, be on your guard when it comes to communications with the SBA or your lender. Be sure to check the sender’s email address or the caller’s phone number to ensure the communication is legit. If you’re unsure, you can always use the SBA’s official website or your lender to initiate contact.

Check Your Application For Accuracy

Always double-check that the information on your application is accurate. Make sure that your payroll information is up to date and all required documentation is current. A simple mistake can potentially delay your loan, so check that everything is accurate before it’s submitted for processing.

Calculate Correctly

There are a few calculations that you must make sure are accurate before your application is submitted. Your average monthly payroll must be accurate and is used to determine your borrowing limits. The PPP application offers guidance on performing these calculations correctly, and you can also direct any questions to your lender.

What Happens After You Apply

Once you’ve found your lender and have submitted your application, it’s time to play the waiting game. Unfortunately, there is no status tracker that lets you check your loan’s status. Instead, you must wait to hear back from your lender in regards to whether your application is approved and when you should expect funds to hit your bank account.

If you haven’t heard anything, feel free to reach out to your lender, but just know that they are working as quickly as they can to help you secure your loan.

More About PPP Loans

In these times of uncertainty, it’s easy to feel overwhelmed. Fortunately, when it comes to PPP loans, we want to help make the process of getting funded as easy as possible. Whether you want to know the differences between round one and round two of PPP funding or you’re looking for a bank to fund your PPP loan, we strive to provide you with the most up-to-date information to make applying for — and receiving — a PPP loan as easy and painless as possible. Good luck!