As round two of Paycheck Protection Program (PPP2 or PPP Second Draw) rolls out, it is clear that the information available can be overwhelming.  Given all the details and guidance that have been provided by the U.S. Treasury and the Small Business Administration (SBA), we offer this summary to highlight the key points that we believe are integral to the program and of most relevance to you as a business owner or management when completing the loan application.   

Remember that it is imperative that you document all calculations and decisions that are made, including your rationale, when filling out your loan applications and maintain meticulous files throughout the application process. While you may not be required to provide some of this information at the time of your application, it may be requested by your bank or the SBA during the forgiveness process, or upon audit. Specific eligibility requirements for both the First Draw and Second Draw PPP loans can be found at

Things you should know about the new PPP Second Draw application form and process:

  • It is anticipated that the SBA will be accepting applications from all lenders beginning on January 18, 2021 and all applications must be received by the SBA by March 31, 2021
  • The simplified forgiveness form for loans under $150k has not yet been released
  • The loan application forms for both first draw and second draw loans have few changes from the previous loan application form. One of these changes includes documenting the company’s decline in gross receipts (must be at least 25% in a 2020 calendar quarter compared to the same quarter of 2019, generally)
  • The new application also includes new expense categories and additional certifications for documenting the purpose of the loan
  • Clarity is still lacking regarding how the number of employees at the time of completing the application should be reported
  • All revenue in whatever form received or accrued in accordance with entity’s accounting method will be used for documenting gross receipts (from what we are hearing, more detailed guidance on accounting methods for gross receipts will not be provided by the SBA)
    • Quarterly or monthly financial statements can be used, or in place of that  cash receipts from bank statements can be utilized, with adjustment for non-revenue items
    • Retail companies may be able to utilize their Point of Sale systems
  • A PPP First Draw forgiveness application does not need to be submitted by the borrower to receive PPP Second Draw loan – the borrower must demonstrate that they have used, or will use the funds
    • Funds can be spent after the First Draw covered period on eligible expenses
      • At least 60% of the funds must still be applied to payroll expenses
      • The borrower must spend the first draw before the second draw is disbursed
  • In certain situations, a borrower may request an increase in their original First Draw loan, but will not be able to apply for this increase until January 25, and -
    • The borrower must work with the original First Draw lender
    • There are limited circumstances to be able to do this (a Procedural Notice (which can be found here: released from the SBA states that, for example, if  a partnership did not originally include partners’ compensation in the original loan request, they may be eligible for an additional disbursement under the original First Draw loan)
    • Can only apply for an increase if forgiveness has not been provided for by SBA
      • If forgiveness application has been submitted but not accepted by the SBA, the lender may be able to “pull” the forgiveness application in order to apply for the First Draw increase
  • Agent fees are allowed to be charged by service providers, like accountants, to support PPP Second Draw applications for borrowers but there are limits to the fees are based on the size of the loan

Things you should know about the Employee Retention Credit: 

  • The credit is based on wages paid during a calendar quarter and can be claimed:
    • If business operations are fully or partially suspended by government order -OR-
    • There is a decline in gross receipts in any calendar quarter in 2020 compared to the same quarter in 2019 (50% decline in 2020/20% decline based on the new 2021 act)
  • To provide greater clarity, additional FAQs for the new law should be released soon
  • The new law extends the credit to June 30, 2021
  • PPP borrowers may claim the Employee Retention Credit in both 2020 and 2021, but not on the same wages that were used for PPP forgiveness
  • The credit increases from 50% to 70% of qualified wages
  • The qualified wage limit is now $7,000 per employee for each of the first two quarters of 2021 with a max of $14,000 ($10,000 in qualified wages X 70%) 
  • Most employers will have wages in excess of the PPP loan and will qualify for wages for the Employee Retention Credit. Consideration should be given since:
    • Employers may have not utilized rent, utilities, etc. on their forgiveness application
    • Employers may have had more payroll expenses than needed for forgiveness
      • Those wages and other eligible forgivable expenses that were/weren’t used for PPP forgiveness since there were excess expenses over the loan may really be able to be utilized for purposes of the Employee Retention Credit
  • Keep in mind, if a company is utilizing other payroll credits (like the Employer Payroll Tax Deferral under the CARES Act), the same wages can’t be utilized for the Employee Retention Credit.

 It is expected that there will be further information released shortly regarding many of these unanswered questions. We will keep you updated as more of the guidelines are clarified.

Chris Martin, Member of the Firm in the Accounting and Auditing Practice at SobelCo, has worked closely with mid-sized, privately-held businesses throughout his entire career. He adds value by assisting clients with their financial statement needs, providing strategic planning for their corporate and individual income taxes, and taking an active role in consulting on major financial decisions.  Chris devotes a significant amount of his time specifically in SobelCo’s food and beverage practice where he manages financial statement audits, reviews, compilations, and income taxes for manufacturers, distributors, and supermarket owners in the tri-state area.