Paycheck Protection Program - Second Draw

Terranova & Associates, LLC strives to keep our clients up to date during these unprecedented times with the fluid government COVID-19 tax changes that will affect you.




President Trump signed into law the Coronavirus Aide Relief and Economic Security Act, knows as CARES Act. On December 27, 2020 President Trump signed the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act to assist businesses and individuals financially impacted by the coronavirus pandemic. Section 311 of this act added a new temporary section 7(a)(37) to the Small Business Act 15 U.S.C. 636(a)(37). This new section authorizes the SBA to guarantee Paycheck Protection Program Second Draw Loans, hereinafter known as “Second Draw PPP Program”.


Here are issues to consider:


We are now moving into the next phase of the PPP where Banks and Lending Institutions will have to issue SECOND DRAW PPP LOAN checks.


Many borrowers of the first PPP Loan that have not applied for Loan Forgiveness or their Bank has not accepted Loan Forgiveness applications can still apply and receive this Second Draw PPP Loan if you have used or will use the full amount of the initial PPP Loan for authorized purposes on or before the expected date of disbursement of the Second Draw PPP Loan.


The SBA guarantees 100% of the Second Draw PPP Loan.


The goal is to provide relief to small businesses in an expeditious time table.


The first date to apply is January 11, 2021 at participating Community Financial Institutions and all other participating Lender on January 13, 2021.


Last day to apply is March 31, 2021.


Second Draw PPP Loans are subject to the following terms:

  • The guarantee percentage is 100 percent.

  • No collateral will be required.

  • No personal guarantees will be required.

  • The interest rate will be 100 basis points or one percent, calculated on a non- compounding, non-adjustable basis.

  • The maturity is five years.

  • All loans will be processed by all lenders under delegated authority and lenders will be permitted to rely on certifications of the borrower to determine the borrower’s eligibility and use of loan proceeds.

  • First Draw PPP Loan that a borrower received in calendar year 2020 is excluded from a borrower’s gross receipts.

  • Borrowers can set PPP coverage period length anywhere between 8 to 24 weeks, whatever suites their needs.

  • Additional expenses are covered including operations expenditures, property damage costs, supplier costs, and worker protection expenditures.


Second Draw PPP Loans are subject to the following eligibility requirements:

  • 300 or fewer employees

  • experienced a revenue reduction of 25% or greater in 2020 relative to 2019

-borrower that was in operation in all four quarters of 2019 is deemed to have experienced the required revenue reduction if it experienced a reduction in annual receipts of 25 percent or greater in 2020 compared to 2019. OR

-25 percent gross revenue reduction, as compared to comparable quarters in 2019 and 2020.

  • Single business entity with a NAICS code beginning with 72.

  • Business concern, independent contractor, eligible self-employed individual, sole proprietor, nonprofit organization eligible for a First Draw PPP Loan, veterans organization, Tribal business concern, housing cooperative, small agricultural cooperative, eligible 501(c)(6) organization or destination marketing organization, or an eligible nonprofit news organization.

  • Seasonal business.

  • Sole proprietors

  • Partnerships


Second Draw PPP Loan excludes the following entities:

  • Any entity excluded from the First Draw PPP

  • A business concern or entity primarily engaged in political activities or lobbying activities, including any entity that is organized for research or for engaging in advocacy in areas such as public policy or political strategy or that describes itself as a think tank in any public documents;

  • Certain entities organized under the laws of the People’s Republic of China or the Special Administrative Region of Hong Kong, or with other specified ties to the People’s Republic of China or the Special Administrative Region of Hong Kong;

  • Any person required to submit a registration statement under section 2 of the Foreign Agents Registration Act of 1938;

  • A person or entity that receives a grant for shuttered venue operators under section 324 of the Economic Aid Act;

  • Entities in which the President, the Vice President, the head of an Executive department, or a Member of Congress, or the spouse of such person owns, controls, or holds at least 20 percent of any class of equity;

  • A publicly traded company, defined as an issuer, the securities of which are listed on an exchange registered as a national securities exchange under section 6 of the Securities Exchange Act of 1934

  • Businesses that are part of a single corporate group shall in no event receive more than $4,000,000.



Second Draw PPP Loan is calculated based upon payroll:

  • Lesser of two- and one-half months of the borrower’s average monthly payroll for calendar year 2020 or calendar year 2019 OR $2,000,000

  • Maximum employee payroll is $100,000



Second Draw PPP Loan supporting document requirements:

  • Loans greater than $150,000 – Must submit documentation adequate to establish gross revenue reduction of 25% or greater in 2020 as compared to 2019. Documentation includes tax forms or annual tax forms, if tax forms are not available quarterly financial statement or bank statements should be adequate. These documents will be confirmed by the Lender.

  • Loans of $150,000 or less – Supporting documentation is not need upon application, but must be submitted on or before the date the borrower applies for loan forgiveness.


Second Draw PPP Loan application:

  • SBA Form 2483-SD (Paycheck Protection Program Second Draw Borrower Application Form); or

  • Lender equivalent. As everyone experienced during the First PPP application process you can expect your Lender to have an on-line portal for you to log into for your application.


Second Draw PPP Loan forgiveness:

  • Loans of $150,000 or less – Must submit documentation adequate to establish gross revenue reduction of 25% or greater in 2020 as compared to 2019. Documentation includes tax forms or annual tax forms, if tax forms are not available quarterly financial statement or bank statements should be adequate. These documents will be confirmed by the Lender.


The Paycheck Protection Program is implemented by the Small Business Administration with support from the Department of the Treasury. Lenders should also visit www.sba.gov or www.coronavirus.gov for more information.



We are available for consultations regarding this and other tax matters if you need assistance, please contact us. We are excited to welcome the new clients that have retained our services!


This is our update as of this time and we will strive to keep you informed; please keep in mind this is a fluid topic and subject to change at any time.


This information should be used to strategically navigate through the months ahead. We are in the office and are happy to assist you.


Please feel free to share this with your relatives and friends and remember we are here to help our clients during this difficult time.



Terranova & Associates, LLC.


Thomas D. Terranova, Jr., CPA, PFS, CITP

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