January 12, 2021
SBA Hot Topic Tuesday – What Lenders Need to Know about the Second Draw PPP Application
Section 311 of the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (the EAA) allows certain small businesses that have already received a Paycheck Protection Program (PPP) loan to apply for a second draw. On Friday, January 6, 2021, the SBA released Form 2483-SD (Second Draw Borrower Application) and Form 2484-SD (Second Draw Lender Guaranty Application) to be used for Second Draw PPP loans. Community financial institutions may begin using the new form to submit Second Draw PPP loans on Wednesday, January 13, 2021, other participating lenders will be able to make Second Draw loans shortly thereafter.
A borrower is eligible for a Second Draw PPP Loan only if they have 300 or fewer employees (including affiliates) and experienced a revenue reduction of at least 25% in any 2020 quarter relative to a corresponding quarter in 2019. In addition, a Second Draw PPP Loan may only be made to an eligible borrower that has received a First Draw PPP loan and has used (or will use) the full amount of the First Draw PPP Loan on or before the expected date on which the Second Draw loan will be disbursed. To reflect these statutory requirements, SBA Form 2483-SD asks the borrower to submit some additional information.
Unlike the form used for First Draw PPP loans (Form 2483), Form 2483-SD includes a size standard box that asks for the applicant’s total number of employees. This differs from the First Draw PPP application, in which the borrower must only check a box stating that they have no more than 500 employees, they meet SBA’s industry size standards, or they meet SBA alternative size standard.
Form 2483-SD also includes a section in which the borrower must list which quarters demonstrate a 25% reduction in revenues and gross receipts for those corresponding quarters. However, the form notes that applicants for loans of $150,000 or less may leave this section blank and instead provide proof when they apply for loan forgiveness. Nevertheless, the borrower must be able to produce proof of the reduction upon SBA’s request.
Finally, the Second Draw form requires the borrower to certify that they will use their First Draw loan prior to disbursement of their Second Draw and that their business has realized a reduction in gross receipts in excess of 25%.
For more information about processing Second Draw PPP loans, sign up for Coleman’s Everything Lenders Need to Know about Second Draw PPP Lending webinar which will be held on Tuesday, January 12, 2021, at 2:00 p.m. Eastern.