Earl Gregorich, CBA
Area Manager & Business Consultant
Greenville Area Small Business Development Centers
In partnership with Clemson University
On January 11, 2021, the SBA and the U.S. Treasury Department reopened the Paycheck Protection Program (PPP) for First Draw PPP loans. Second Draw PPP Loans were made available on January 13, 2021. Interested borrowers can apply for both PPP loans through participating lenders but, you may want to check into the details first.
It is recommended you work with your local SC Small Business Development Center and your business banking professional. The SBA.gov website has a Lender Match tool and a lender mapping tool if you need help finding a lender.
As part of the second draw, there is a $25 billion set-aside for borrowers who meet specific criteria like, having a maximum of 10 employees and need a loans of $250,000 or less. Borrowers considered for the set aside program must also be located in low or moderate income neighborhoods.
The Second Draw PPP loans can be used for payroll costs, mortgage interest, rent, utilities, worker protection costs (PPE), and uninsured property damage costs due to looting or vandalism occurring in 2020. Other supplier and operating expenses may also be acceptable uses of funds as outlined on the SBA.gov website.
Borrowers may qualify for a maximum loan amount of 2.5x average monthly 2019 or 2020 payroll costs up to $2 million. Businesses in the Accommodation and Food Service industries may qualify for 3.5x average monthly payroll costs in 2019 or 2020, up to $2 million. Your business NAICS code must begin with “72” to qualify for the 3.5x multiplier. See your tax returns or contact the SBDC for assistance finding your NAICS codes.
In order to qualify for the Second Draw PPP, you must also have received and used the full amount of a First Draw PPP. You must have 300 or fewer employees and must show at least a 25% reduction in gross receipts between two comparable quarters in 2019 and 2020.
If you are interested and meet the qualifications, it is recommended you act fast. The period to apply for a Second Draw PPP will only be open until March 31, 2021 or until funds are exhausted. Borrowers should obtain an application from their lender or download Form 2438SD from the SBA.gov website. This form will outline specific requirements and list any other documentation that may be needed.
Similar to first draw loans, Second Draw PPP Loans made to eligible borrowers may qualify for full loan forgiveness if, during the 8-to-24-week covered period following loan disbursement:
- Employee and compensation levels are maintained in the same manner as required for the First Draw PPP loan (typically no more than a 25% reduction)
- The loan proceeds are spent on payroll costs and other eligible expenses and at least 60 percent of the proceeds are spent on payroll costs
Keep in mind the rules and regulations surrounding stimulus legislation are constantly being adjusted. For the latest information on PPP loans and other small business related stimulus, consult the SBA.gov website or contact your local SC SBDC office.
The SC SBDC advances South Carolina’s economic development by providing entrepreneurs throughout the state no-fee consulting, affordable training programs and access to an array of resources that can help them expand or create a thriving small/medium-size business. Contact the Greenville SBDC office at 864-370-1545.