2021 Paycheck Protection Program Loan First and Second Draws: Who is Eligible?

Posted on Jan 27, 2021

The Consolidated Appropriations Act, 2021 made a second draw of Paycheck Protection Program (PPP) loans available to qualifying organizations. Here is an overview of the entities eligible for first and second draw PPP loans:

Eligible for First Draw PPP Loans

  • Small entities that, together with their affiliates, have 500 or less employees. This includes nonprofits, veterans’ organizations, tribal concerns, self-employed individuals, sole proprietorships, and independent contractors.
  • Certain entities with more than 500 employees in certain industries can also apply. This includes businesses with a NAICS Code that begins with 72 (The Accommodation and Food Services sector) or eligible news organizations with no more than 500 employees per physical locations, housing cooperatives, 501(c)(6) organizations, or destination marketing organizations with no more than 300 employees.
  • Businesses that were operational before February 15, 2020 and had employees for whom they paid salaries and payroll taxes or paid independent contractors, as reported on a Form 1099-MISC. If a seasonal business was dormant or not fully operating as of February 15, 2020, they are still eligible if the business was in operation for any 12-week period between February 15, 2019 and February 15, 2020.
  • Businesses that are still open and operational.

Eligible for Second Draw PPP Loans

  • The borrower must have previously received a first draw PPP loan and will or has used the full amount (only for authorized uses) before the date they expect to receive the second draw PPP loan. If a company did not get a PPP loan in the first round, they would apply for a first draw PPP loan.
  • The borrower must have no more than 300 employees. The same affiliation rules that apply to the first draw PPP loans apply to the second draw PPP loans. A borrower is considered together with its affiliates to determine eligibility for the PPP. (Except as noted below for certain categories of borrowers)
  • The borrower can demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020. This means they can look at gross receipts in two ways:
    • Either annually comparing 2020 to 2019, which makes it harder to qualify; or
    • Looking at each quarter in 2020 compared to the corresponding quarter in 2019. If one quarter has at least a 25% decline, they qualify, as long as they meet the other eligibility rules
  • NAICS codes beginning with 72 have unique rules. If each hotel or restaurant location owned by a parent business is a separate legal business entity and employs not more the 300 employees, each hotel or restaurant location is permitted to apply for a separate PPP loan provided it uses its unique EIN. Click here for more information on financial aid available to restaurants and hotels.
  • Eligible news organizations with a NAICS code beginning with 51110 or 5151 may qualify for the affiliation waiver for the second draw PPP loans only if they employ 300 or fewer employees per physical location.

If you have any questions regarding eligibility for first or second draw PPP loans, contact a Clark Nuber advisor.

Emma Tsuber, Audit Manager at Clark Nuber PS

Emma Tsuber is a manager in Clark Nuber’s Audit and Assurance Services Group.

© Clark Nuber PS and Developing News, 2021. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Clark Nuber PS and Developing News with appropriate and specific direction to the original content.

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