Eligibility Business Guidelines and Use of Funds

Eligibility Business Guidelines and Use of Funds

First Draw Business Eligibility Guidelines

First Draw PPP loans are available to businesses that were in operation on Feb. 15, 2020, and come from one of the following groups:

  • Businesses with 500 or fewer employees that are eligible for other SBA 7(a) loans.
  • Sole proprietors, independent contractors, and eligible self-employed individuals.
  • Not-for-profits, including churches.
  • Accommodation and food services operations with NAICS codes starting with 72 with fewer than 500 employees per physical location.
  • 501(c)(3)(6) business leagues, such as chambers of commerce, visitors’ bureaus, etc., and “destination marketing organizations” that have 300 or fewer employees and do not receive more than 15% of receipts from lobbying. 

    -
    The lobbying activities must comprise no more than 15% of the organization’s total activities and have cost no more than $1 million during the most recent tax year that ended prior to Feb. 15. 2020. Sports leagues are not eligible.
  • News organizations that are majority-owned or controlled by an NAICS code 511110 or 5151 business or not-for-profit public broadcasting entities with a trade or business under NAICS code 511110 or 5151. The size limit for this category is no more than 500 employees per location.

    The maximum loan amount for a First Draw PPP Loan is $10,000,000.

Second Draw Eligibility Guidelines

  • 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, full year 2019 AND 2020 comparisons, or the following modifications to unique situations:

    - If your business was in operation for a portion of the 2019 calendar year, then any calendar quarter 2020 compared to any quarter in 2019 (2019 second, third, or fourth as applicable).

    - If your business was not in operation in 2019 and was started between 1/1/2020 and 2/15/2020, then second, third or fourth calendar quarter or 2020 compared to the first quarter of 2020.
  • Documentation to support may include relevant tax forms (including sales tax forms), including annual tax forms, or, if relevant tax forms are not available, quarterly financial statements or bank statements.
  • SBA defines revenues as gross receipts: All revenue in whatever form received or accrued from whatever source, including from the sales of products or services, interest, dividends, rents, royalties, fees, or commissions, reduced by returns and allowances.
  • SBA clarified that any forgiveness amount received on a First Draw PPP loan is not included in the calculation of borrower’s gross receipts.

    The maximum loan amount for a Second Draw PPP Loan is $2,000,000.

Eligible Costs

PPP borrowers can have their first- and second-draw loans forgiven if the funds are used on eligible costs. 

  • As with the first round of the PPP, the costs eligible for loan forgiveness in the revised PPP include payroll, rent, covered mortgage interest, and utilities. 
  • In addition, the following are added expandable expenses:Covered worker protection and facility modification expenditures, including personal protective equipment, to comply with COVID-19 federal health and safety guidelines.

    - Covered property damage costs related to property damage and vandalism or looting due to public disturbances in 2020 that were not covered by insurance or other compensation.

    - Expenditures to suppliers that are essential at the time of purchase to the recipient’s current operations.

    - Covered operating expenditures, which refer to payments for any business software or cloud computing service that facilitates business operations; product or service delivery; the processing, payment, or tracking of payroll expenses; human resources; sales and billing functions; or accounting or tracking of supplies, inventory, records, and expenses.

To be eligible for full loan forgiveness, PPP borrowers will have to spend no less than 60% of the funds on payroll over a covered period between eight or 24 weeks.

If you owe money on any unforgiven portion of the PPP loan, it will be 5-year term loan at 1% interest rate.

Please keep in mind this information is changing rapidly and is based on our current understanding of the programs. It can and likely will change. Although we will be monitoring and updating this as new information becomes available, please do not rely solely on this for your financial decisions. We encourage you to consult with your lawyers, CPAs and Financial Advisors.