Paycheck Protection Program

PPP Round 2: Key Details & Loan Eligibility Requirements

Last week, the SBA released new guidance related to the availability of and eligibility for additional funds available under the Paycheck Protection Program (PPP).

The SBA also announced that the PPP program officially reopens on January 11, 2021. Initially, loan applications will only be accepted through community financial institutions, with all participating lenders included shortly thereafter.

The following summarizes some key points of The Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Economic Aid Act or Act) and updated SBA guidance and is accompanied by an easy-to-read table that outlines the salient features of the guidance.

Please reach out to MFA’s PPP Advisory Team for our interpretations of the new provisions and any additional information that may be relevant to your business.


The recently enacted Economic Aid Act earmarks an additional $284 billion for PPP loans. The program ends the earlier of March 31, 2021 or the exhaustion of the funds.

First Draw Loans
First draw loans are available to entities that were in operation on February 15, 2020 and employ less than 500 employees. This may include (1) businesses that did not receive a prior PPP loan as well as (2) borrowers whose 2020 loan was not forgiven and potentially qualify for a larger draw.

First draw loans continue to use the original formulas under the CARES Act to determine the loan size, i.e., 2.5x the average monthly payroll costs up to $10 million per borrower.

Second Draw Loans
Second draw loans are available to a more select group and only if the full amount of the first draw loan will be or has been used for authorized purposes. To qualify for a second draw loan, the employer must generally have less than 300 employees and demonstrate a 25% reduction in gross receipts between comparable quarters in 2019 and 2020.

Second draw loans use the same 2.5x average monthly payroll costs for most borrowers but restaurants, hotels and other establishments that provide lodging and/or food for immediate consumption are allowed a factor of 3.5x the average monthly payroll costs. All second draw PPP loans are capped at a maximum of $2 million per borrower.

Loan Eligibility

Certain previously excluded entities are eligible to apply for first draw PPP loans. Additionally, certain businesses are not eligible for a PPP loan under the new round of funding, including public companies, lobbying firms, businesses that have permanently closed, and others.

MFA Observations
Entities that expect to apply for a PPP loan should begin to proactively prepare and gather all of the necessary financial information and related documentation so they can apply as soon as their lender reopens its application process.

The demand for these loans is expected to exceed the funding, so it is recommended that applications be filed as early as possible.

Please connect with MFA’s PPP Advisory Team to review your eligibility under the current guidance and to ensure you implement the necessary practices to maximize ultimate forgiveness.

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