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Who Qualifies for a Second Round of P.P.P. Loans?

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The hardest-hit owners will be eligible for another loan from the Paycheck Protection Program.

The Paycheck Protection Program is back.

Between April and August, the program distributed $523 billion in forgivable government-backed loans to 5.2 million small businesses to help them keep paying their workers through the pandemic’s economic devastation.

Now it’s restarting, after Congress included $284 billion in new funding in the stimulus package it passed in December. Crucially, the program will give the hardest-hit businesses a chance at a second loan.

P.P.P. 2.0 makes other changes, too, including to eligibility and to limits for some loan sizes. Here’s what you need to know.

The new funding is available to both first-time applicants and returning borrowers.

For first-time applicants, most of the original rules apply. A company or nonprofit organization must generally have 500 or fewer workers, although companies in some industries can qualify with more employees. The applicants also must certify that “current economic uncertainty makes this loan request necessary” to support their continuing operations.

More groups are now eligible because of the recent stimulus bill, including nonprofit housing cooperatives, newspapers, broadcasters and local chambers of commerce.

Applicants must have been in operation on Feb. 15, 2020, to qualify. Self-employed business owners, including independent contractors, are also eligible for loans, but a rule imposed by the Small Business Administration requires sole proprietorships to have shown a profit on their 2019 tax return to qualify.

The rules are more strict for those seeking a second loan.

Larger business are not eligible: Second-loan applicants must have 300 or fewer workers. (Publicly traded companies, political lobbyists and members of Congress are barred from receiving a second loan.)

They also have to show a certain amount of hardship: a 25 percent drop in gross receipts between comparable quarters in 2019 and 2020. They must also show that they used all of the money from the first loan in allowable ways.

As they were last year, the loans are issued by banks and other lenders. But some lenders got a head start.

Most borrowers can apply starting Jan. 19 at what are expected to be thousands of participating lenders, from major banks like JPMorgan Chase and Wells Fargo to fintechs like PayPal and Square.

A small group of community lenders were able to start taking applications a few days early. They include Community Development Financial Institutions, Minority Depository Institutions and Certified Development Companies — specially designated lenders that focus on underserved populations, including Black- and other minority-owned businesses.

Banks and credit unions with $1 billion or less in assets can start taking applications on Jan. 15.

The deadline to apply is March 31.

First-time borrowers are eligible for 2.5 times their average monthly payroll cost, up to $10 million. (For sole proprietors, the calculation is different. They can borrow 2.5 times the monthly profit they reported on their 2019 Schedule C tax form.)

Loans for second-time borrowers are capped at $2 million. Food services and lodging businesses, such as restaurants and hotels, can get loans of 3.5 times their average monthly payroll, but the $2 million cap still applies.

Borrowers can have their loan forgiven if they follow the program’s rules.

At least 60 percent of the loan must be used to pay workers, and the rest must be spent on qualifying expenses. Borrowers can choose how much time they want to spend the money, as long as it’s between eight and 24 weeks.

Notably, borrowers don’t have to keep their employees’ head count and wages at pre-pandemic levels to have their loan forgiven, if they certify that they had to cut staff to comply with federal guidance on “sanitation, social distancing, or any other work or customer safety requirement related to Covid-19.”

Loans that aren’t forgiven carry a 1 percent interest rate and a repayment term that will generally run for five years.

The other 40 percent can go toward rent, utilities, mortgage interest payments and other expenses.

The new stimulus bill added some items to the list: payments to suppliers, certain property damage not covered by insurance, Covid-related safety gear for workers, and the cost of erecting barriers and otherwise altering spaces to comply with social distancing guidelines and other health mandates.

The best place to start will be a bank you’ve used already. Last year, many national banks took applications only from borrowers they had worked with before.

Most borrowers seeking a second loan will be able to apply through the lender that issued their first loan.

Thousands of community banks and specialist lenders are also participating. The Small Business Administration runs a Lender Match program to connect applicants with willing lenders.

More than you may have needed in the spring.

Exact requirements vary by lender, but applicants will generally need copies of their payroll records. Many lenders will also request the business’s 2019 tax return and documents like articles of incorporation or a state business registration certificate.

Those seeking second loans will need records showing that their sales dropped at least 25 percent in one quarter last year. Lenders are not required to collect that proof before making a loan under $150,000, but they must get it before the loan is eligible to be forgiven. Most lenders plan to ask for it during the application process.

In the program’s first round, the Small Business Administration approved lenders’ applications instantaneously, allowing some loans to be disbursed just hours after the borrower applied. This time, the agency has added more fraud checks, and many lenders have also intensified their vetting. A typical loan will take at least a few days to go from application to payment.

When the program started in April, the money ran out in just 13 days, infuriating applicants who were shut out. Congress quickly allocated more, which proved sufficient: When the program ended in August, more than $120 billion was unspent.

This time, Treasury Department officials believe, the $284 billion will be enough to fund all qualified applications.

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