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Second Draw PPP Loans: An Overview 

■ ■ ■  January 19, 2021

On December 27, 2020, the $900 billion Coronavirus Response and Relief Supplemental Appropriations (CRRSA) Act 2021 was enacted as a follow-up to the CARES Act.  The CRRSA provided several clarifications with respect to the Paycheck Protection Program (PPP) as well as the requirements and guidelines for the Second Draws of PPP Loans.  On January 13, 2021, the Small Business Administration (SBA) began accepting applications for Second Draw PPP Loans.  This Alert provides an overview of the Second Draw PPP Loan requirements and clarifications to the First Draw PPP Loan.


1. Who is Eligible for Second Draw?

To be eligible for a Second Draw PPP Loan, a business must meet the following requirements:

  1. Received a First Draw PPP Loan and demonstrate that the full amount has been used or will be used on eligible expenses before the Second Draw PPP Loan is disbursed;

  2. Employ no more than 300 employees; and

  3. Demonstrate at least a 25% reduction in gross receipts in any single comparable quarter in 2019 and 2020.

    • Gross receipts include all revenue received or accrued

    • Gross receipts do not include:

      • a forgiven PPP Loan.

      • taxes collected for and remitted to a taxing authority.

      • proceeds from transactions between the business and its domestic or foreign affiliates.

      • amounts collected for another by a travel agent, real estate agent, advertising agent, conference management service provider, freight forwarder or customs broker.


For those who are seeking the PPP Loan for the first time, the requirements remain the same and can be found here.


2. How Much Can I Receive Under the Second Draw PPP Loan?

Businesses will be eligible to receive the lesser of 2.5 times their average monthly payroll costs or $2 million (accommodation and food services businesses who use NAICS code 72 may use a multiplier of 3.5 times, instead). When calculating average monthly payroll costs, the business must look at either the twelve-month period prior to when the loan is made (calendar year 2020) or calendar year 2019. Businesses who are part of a single corporate group cannot receive more than $4 million in the aggregate.


3. How Can I use the Second Draw PPP Loan?

Under the CRRSA Act, the eligible costs that can be paid under the PPP, were expanded beyond payroll, rent, mortgage interest, and utilities to also include:

  • Worker protection and facility modification expenditures including personal protective equipment (PPE);

  • Property damage costs related to vandalism or looting due to 2020 public disturbances which were not covered by insurance or other compensation;

  • Expenditures to suppliers that are essential at the time of purchase to the business’s current operations; and

  • Operating expenditures, which refer to payments for any business software or cloud computing service that facilitates business operations.


4. Will the Second Draw PPP Loan be Forgiven?

Yes, so long as, (i) during the covered 8-to-24-week period following loan disbursement, the PPP borrower maintains employee and compensation levels in the same manner as required for the First Draw PPP loan, (ii) the loan proceeds are spent on payroll costs and other eligible expenses; and (iii) at least 60% of the loan proceeds are spent on payroll costs.    


5. Are Tax Deductions Allowed for Expenses Paid with PPP Loan Proceeds?

Yes. The Consolidated Appropriations Act, 2021 (CAA 2021) states that deductions are allowed for otherwise deductible expenses paid with PPP Loan proceeds regardless of whether the loan is forgiven and that the tax basis of the borrower’s assets will not be reduced as a result of the loan forgiveness. Moreover, if you received an EIDL advance of $10,000 or less, your PPP Loan forgiveness will no longer be penalized by that amount.


6. Who is Ineligible?

The following businesses are ineligible to receive PPP funding:

  • Not in operation on February 15, 2020

  • Engaged in any activity that is illegal under federal, state, or local law

  • Household employer (individuals who employ household employees such as nannies or housekeepers)

  • 20% or more owner of employer is incarcerated, on parole, subject to criminal indictment or convicted of a felony within the last five years (one-year for non-financial felonies)

  • Any business owned or controlled by them has ever obtained a direct or guaranteed loan from SBA or any other federal agency that is currently delinquent or has defaulted within the last seven years and caused a loss to the government

  • Received or will receive a grant under the new Shuttered Venue Operator Grant Program

  • A direct or indirect controlling interest in the business is held by the President, Vice President, head of an Executive Department, Member of Congress, or the spouse of any of these.

  • Publicly held company

  • Business that has permanently closed


7. When and How Can I Apply?

Borrowers can apply for a Second Draw PPP Loan until March 31, 2021, through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, eligible non-bank lender, or Farm Credit System institution that is participating in PPP.

The Treasury and SBA will continue to issue guidelines further clarifying the CRRSA Act. At MDO Partners, our attorneys and advisors are working diligently to continue informing and assisting our clients with important advice under the PPP, including the Second Draw PPP Loan.

About MDO Partners
MDO Partners is a boutique law firm that focuses on Corporate, International, and Real Estate Law, as well as Global Compliance and Business Ethics. The firm is comprised of a solid team of attorneys and advisors with more than 100 years of combined experience who are committed to the business goals and best interests of their clients. The firm delivers value-added services of the highest caliber and serves as a trusted advisor to its clients with a practical and business-savvy approach.

If you have questions or comments regarding this Alert, please contact one of the attorney's or advisor's listed below.


Richard Montes de Oca

Managing Partner


Claudia Herbello

Associate Counsel





175 SW 7th Street

Suite 1900
Miami, FL 33130

Contact us:

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