SBA PPP Second Draw
Frequently Asked Questions
These questions and answers are being provided as a convenience. The answers are based on our interpretation of the SBA rules, procedures and frequently asked questions. This information does not, and is not intended to, constitute legal advice; instead, all information, content, and materials are for general informational purposes only. The information below may not constitute the most up-to-date legal or other information and Enterprise Bank & Trust may update this information without notice. You should contact your attorney to obtain advice with respect to any particular legal matter below. Enterprise Bank & Trust gives no warranty and accepts no responsibility or liability for the accuracy or the completeness of the information and materials contained below. All liability with respect to any action taken or not taken based on the content below are hereby expressly disclaimed.
What is a Second Draw PPP loan?
PPP now allows certain eligible borrowers that previously received a PPP loan to apply for a Second Draw loan with the same general loan terms as their First Draw loan. Second Draw loans can be used to help fund payroll costs, including benefits. Funds can also be used to pay for mortgage interest, rent, utilities, worker protection costs related to COVID-19, uninsured property damage costs caused by looting or vandalism during 2020, and certain supplier costs and expenses for operations.
Am I eligible for a Second Draw loan?
A borrower is generally eligible for a Second Draw loan if the borrower:
- Previously received a First Draw 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.
- Businesses that have permanently closed are not eligible for a Second Draw loan. Businesses that are "temporarily closed" or that have "temporarily suspended" operations are, however, eligible for such loans.
- Borrowers do not have to submit a forgiveness application or have received forgiveness before submitting a Second Draw loan application.
The types of entities that generally qualify are:
- Business entities (e.g., partnerships, corporations, LLCs, etc.)
- Sole proprietorships, independent contractors, self‐employed individuals
- 501(c)3 entities
- 501(c)6 entities
- 501 (c)19 Veterans organizations
- Tribal businesses
- Housing cooperatives
- Destination marketing organizations
- Eligible news organizations
NOTE: Some of the above types of entities may not be eligible due to the types of activities they engage in, because of other characteristics, or because they fail affiliation rules. For more information, consult the Interim Final Rule for Second Draw loans.
How is the 25% revenue reduction calculated?
A borrower must show at least a 25% reduction in gross receipts in Q1, Q2, Q3, or Q4 of 2020, as compared to the same quarter in 2019. A borrower that was in operation for all four quarters of 2019 is deemed to satisfy this revenue reduction requirement if it experienced a reduction in annual receipts of 25% or greater in 2020 compared to 2019, and the borrower submits annual tax forms substantiating such revenue decline. Forgiveness amounts received pursuant to PPP 1 Loans are excluded from a borrower's gross receipts calculation.
What can I use my Second Draw funds for?
The permitted use of proceeds are: 1) payroll costs, 2) rent, 3) utilities, 4) interest on mortgages and 5) interest on other debt obligations on debt incurred before February 15, 2020, plus the following newly eligible expenses:
- Covered operations expenditures (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).
- Covered supplier costs that are essential to the borrower’s operations made pursuant to a contract, order, or purchase order that was in effect before the covered period with respect to the applicable covered loan or, in the case of perishable goods, at any time before or during the covered period of the loan.
- Covered property damage costs (costs related to property damage and vandalism or looting due to public disturbances that occurred during 2020 that was not covered by insurance or other compensation).
- Covered worker protection expenditures including personal protective equipment and other costs needed for compliance with governmental guidance related to the COVID‐19 emergency beginning on March 1, 2020, and extending to the end of the national emergency declaration.
PPP borrowers that have not had their PPP 1 Loan forgiven may include the newly eligible expenses in the calculation of their use of PPP funds for permitted purposes.
To receive full loan forgiveness, during the 8- to 24-week covered period following loan disbursement, a borrower meet the following requirements:
- Employee and compensation levels are maintained in the same manner as required for the First Draw loan;
- The loan proceeds are spent on payroll costs and other eligible expenses; and
- At least 60 percent of the proceeds are spent on payroll costs.
Forgiveness will be reduced proportionally if payroll does not meet the 60% threshold.
How long do I have to spend the Second Draw loan proceeds?
Your “loan forgiveness covered period” is the period beginning on the date the lender disburses the PPP loan and ending on any date selected by the borrower that occurs during the period (i) beginning on the date that is 8 weeks after the date of disbursement and (ii) ending on the date that is 24 weeks after the date of disbursement
What is the maximum loan amount for a Second Draw loan?
For most borrowers, the maximum loan amount of a Second Draw loan is 2.5x average monthly 2019 or 2020 payroll costs up to $2 million. For borrowers in the Accommodation and Food Services sector (click here for list of NAICS 72), the maximum loan amount for a Second Draw Loan is 3.5x average monthly 2019 or 2020 payroll costs up to $2 million.
What is the time period I should use to calculate payroll costs for a Second Draw loan?
The time period for calculating a borrower’s payroll costs for a Second Draw Loan is either the twelve-month period prior to when the loan is made or calendar year 2019. A borrower may also use the calendar year 2020. The Interim Final Rule for Second Draw Loans (linked earlier in this FAQ) discusses this in more detail.
What are terms and conditions of a Second Draw loan?
All Second Draw Loans will have the same terms regardless of lender or borrower. The loan is an SBA 7(a) loan with the following terms:
- 1.00% fixed interest rate
- Repaid over a five-year term
- Up to 100% of the principal and accrued interest may be forgiven after eight weeks
How do I apply for a Second Draw loan?
You can read instructions and get a link to the Second Draw application by visiting our SBA PPP Application Process page.
What is the deadline for submitting a Second Draw loan application to Enterprise?
PPP has been extended to March 31, 2021. This is the last date on which a PPP loan application can be submitted to and approved by the SBA. To provide adequate processing time, we will stop accepting applications on March 15, 2021. Receipt of an application by March 15 does not guarantee that a PPP loan will be processed by Enterprise and approved by the SBA by the March 31 deadline.
What Payroll Costs supporting documents do I need to provide with the Second Draw loan application?
The documentation required to substantiate an applicant’s payroll cost calculations is generally the same as documentation required for First Draw Loans.
For applicants who received their original PPP loan from Enterprise or Seacoast, no additional documentation to substantiate payroll costs will be required if you:
- used calendar year 2019 figures to determine your original (First Draw) Loan amount
- used calendar year 2019 figures to determine your Second Draw Loan amount (instead of calendar year 2020)
In other words, if you used 2019 as the basis for your original PPP loan and for the Second Draw and your original PPP loan was originated by Enterprise or Seacoast, you are NOT required to submit additional documentation to substantiate payroll costs. In such cases, additional documentation is not required because the lender (Enterprise / Seacoast) already has the relevant documentation supporting your payroll costs. We may request additional documentation, if on further review we conclude that it would be useful in conducting our good-faith review of your Second Draw loan amount calculation or to meet other regulatory requirements.
If you use 2020 as the basis for your Second Draw loan, you will be required to submit documentation to substantiate your payroll costs. Payroll records, tax filings and other documentation similar to what was provided to us for your original PPP loan must be provided.
For applicants who received their original PPP loan from another lender, you must provide all the payroll costs documentation that was submitted to that lender in conjunction with the origination of your original loan. In addition, Enterprise will require corporate organizational documents.
What 25% Revenue Reduction supporting documents do I need to provide with the Second Draw loan application?
For loans with an amount greater than $150,000
For loans with an amount of $150,000 or less
You must submit documentation adequate to establish that you experienced a revenue reduction of 25% or greater in 2020 relative to 2019.
You are not required to submit revenue reduction documentation with the loan application. However, the revenue reduction documentation must be submitted on or before the date you apply for loan forgiveness.
If I do not have an Enterprise checking or savings account, will I need to open one if I am approved for a Second Draw loan?
Yes, an Enterprise checking or savings account will be required to close and fund the loan.
Is the borrower demographic information on the Second Draw application required?
No, the disclosure of this information is optional and voluntary and will have no bearing on the loan decision. The SBA encourages all borrowers to complete the information.
When do I have to start making principal and interest payments on my Second Draw loan?
If the borrower does not apply for loan forgiveness within 10 months after the last day of the covered period, or if SBA determines that the loan is not eligible for forgiveness (in whole or in part), the Second Draw loan is no longer deferred and the borrower must begin paying principal and interest. If this occurs, the lender must notify the borrower of the amount and date the first payment is due.
Borrowers may repay their PPP loan at any time without a prepayment penalty. You will be charged accrued interest on the PPP loan for any time it was outstanding.
When will I receive funding if I submitted an application?
Enterprise is working to approve your loan and disburse funds as fast as possible. Due to high volume, we are unable to provide you with an exact time. Your loan will be funded within 10 calendar days from SBA approval, as long as we receive signed and completed paperwork from you in a timely manner. If we do not receive paperwork back in a timely manner, the SBA requires your loan application to be canceled if not funded within 20 calendar days.
I submitted my application and didn’t hear back. When will I hear something?
You will hear from Enterprise as soon as the SBA accepts your loan application.
I submitted my application and want to change the amount. What should I do?
No changes are permitted after your PPP loan has been funded. Please contact your Relationship or Portfolio Manager to discuss any necessary changes prior to funding your loan.
I received my PPP funds and want to change the amount. What should I do?
No changes are permitted after your PPP loan has been funded.
I have received the loan document. Where is information about loan forgiveness?
You can reference Section 1106 of the CARES Act (the “Act”) regarding forgiveness of the loan, which will be determined at a later date in accordance with the Act. Your Note refers to the Act in Section 3, Payment Terms, and makes the Note subject to the Act.
How does an EIDL loan impact my Second Draw loan?
The Economic Aid Act repealed the CARES Act provision that any EIDL Advance amounts would reduce PPP loan forgiveness. The new Act repeals this provision so these advances are now forgivable and should be deducted from any EIDL loan amounts on the application.
Will the SBA perform reviews on Second Draw loans?
The SBA may review any PPP loan of any size at any time at its discretion. If SBA undertakes such a review, SBA will notify the Lender and the Lender must notify the borrower in writing within five business days of receipt of notification. The SBA may also request additional information directly from the borrower.
What are the records retention requirements for the Second Draw loans?
Borrowers that receive a loan of $150,000 or less must retain records that prove compliance with the PPP requirements—with respect to employment records, for the 4-year period following submission of the loan forgiveness application, and with respect to other records, for the 3-year period following submission of the loan forgiveness application.
All other borrowers are required to retain PPP loan supporting documents for a period of six years after the date that the loan is forgiven or repaid in full. Such information includes payroll documentation, documentation supporting the borrower’s certifications, documentation delivered in connection with, and in support of, the borrower’s loan forgiveness application, and any other records demonstrating material compliance with PPP requirements.
SBA may review and audit PPP loans of $150,000 or less and access any records the borrower is required to retain. All borrowers with loans of any size must provide documentation independently to a lender to satisfy relevant Federal, State, local or other statutory or regulatory requirements or in connection with an SBA loan review.
Questions about PPP records retention should be directed to your legal counsel, financial advisor or accountant for assistance.
Where can I get more information on the PPP forgiveness process and rules?
A link to the SBA FAQ’s on loan forgiveness is here.
Does Enterprise pay agents or agent fees?
Enterprise may pay agent fees if the agency is disclosed at the time the loan application is submitted and the parties reach a contractual agreement for fees that are consistent with SBA requirements.
Are there any other products available as part of the relief package that could positively impact (forgiveness, cover payments, etc.) my business loan with Enterprise?
Yes. You can discuss options with your Relationship or Portfolio Manager.
Who can help answer my question if it’s not on the website?
Due to the overwhelming number of questions, we are asking borrowers to discuss questions with their legal counsel, financial advisor or accountant for assistance. Ultimately, the accuracy of the calculation is the responsibility of the applicant. For more information on the program, you can review the SBA website at SBA.gov.