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Guidance on Second Round of PPP, EIDL Loans and Grants

by Sarah Skillin Woodard
The National Council of Nonprofits held a webinar on the Consolidated Appropriations Act on January 13, 20201. Watch the recording and view the slides for more details.

The Consolidated Appropriations Act of 2021 (the “Act”), signed into law on December 27, 2020, updates several provisions from the Coronavirus Aid, Relief, and Economic Security (CARES) Act, specifically for Paycheck Protection Program (PPP) loans.

Paycheck Protection Program Loans (PPP)

Applications for the PPP will re-open this week for new borrowers and certain existing PPP borrowers. To promote access to capital, initially only community financial institutions will be able to make First Draw PPP Loans on Monday, January 11, and Second Draw PPP Loans on Wednesday, January 13. The PPP will open to all participating lenders shortly thereafter. The SBA released the new application forms for organizations seeking PPP loans – both First Draw (Form 2483) and Second Draw (Form 2483 SD) loans.

SBA also published “top-line overviews” of the First Draw and the Second Draw programs. The release also includes a Procedural Notice – SBA Procedural Notice on Repeal of EIDL Advance Deduction Requirement. SBA will no longer deduct the value of Economic Injury Disaster Loan (EIDL) advances from PPP loan forgiveness. For PPP loans that have already been forgiven minus the value of EIDL advances, SBA will cover the amount of the advances and the borrower’s debt will be erased.

The Small Business Administration released additional PPP guidance on January 7 interpreting provisions of the new COVID relief law:

Second PPP Loan Eligibility

The Act allows eligible entities to receive a second PPP loan, referred to as a “second draw.”

To qualify as an eligible entity, a prospective PPP borrower must:

  • Employ not more than 300 employees; and
  • Demonstrate at least a 25% reduction in gross receipts in any quarter of 2020 relative to the same 2019 quarter. (MANP is waiting for an answer as to how restricted gifts are treated when calculating “gross receipts.”)

Special rules apply for the determination of whether entities that did not exist for some or all of 2019 meet this revenue loss requirement.

Generally, the second draw loan amount is calculated on the same basis as the original PPP loans (up to 2.5 times average total monthly payroll costs in the one year prior to the loan), but is capped at $2 million.

Change in Covered Period

The covered period for a PPP loan is 24 weeks (or 8 weeks for borrowers who received their loans prior to June 5, 2020, and elect to use an 8-week covered period). The Act would allow borrowers to select any covered loan length from 8 weeks after loan origination to 24 weeks after loan origination.

Expansion of Loan Uses Eligible for Forgiveness

The Act expands the permitted and possible forgiveness of the uses of PPP loan proceeds to include:

  • Payroll expenses and covered utilities and covered rent permitted under the CARES Act
  • Covered operations expenditures (e.g., software, cloud computing, human resources and accounting needs)
  • Covered supplier costs (e.g., contracted payment for goods in effect prior to the PPP loan covered period and that are essential to the current operations of the entity when made)
  • Covered worker protection expenditures (e.g., expenditures for PPE needed to comply with federal health and safety guidelines related to the COVID-19 pandemic between March 1, 2020 and the date on which COVID-19 no longer qualifies for federal emergency status)
  • The Act clarifies that employer-provided group insurance benefits other than healthcare benefits (e.g., group life, dental, vision, or disability) fall within the definition of forgivable payroll costs.

Borrowers would be eligible for loan forgiveness equal to the sum of their payroll costs, covered mortgage, rent, utility payments, covered operations expenditures, covered property damage costs, covered supplier costs, and covered worker protection expenditures incurred before the end of the covered period (as modified by the Act). The current spending requirement of 60/40 minimum on payroll costs for full forgiveness would continue to apply.

Simplified Forgiveness Application

The Act would simplify the loan forgiveness application and documentation process for many borrowers as follows:

  • Loans up to $150,000 would be forgiven in full if the borrower signs and submits a certification (of not more than one page) that provides minimal information (number of employees retained due to PPP loan, estimated amount of loan spent on payroll expenses, and total loan value) and agrees to retain relevant records for a period of four years (employment records) or three years (all other records).
  • Loans over $150,000 would be subject to the Small Business Administration’s (SBA) current loan forgiveness procedures and would remain subject to SBA audit.
  • Certification applicable to loans over $2 million (SBA Forms 3509 and 3510) appears to be unaffected by the Act.

Increased Loan Amount Flexibility

PPP borrowers may submit a request for an increase in the covered loan amount (regardless of whether the initial covered loan amount has been fully disbursed or the lender of the initial covered loan has submitted Form 1502 to the SBA (a form required to be completed by lenders). Also notable, any eligible recipient that returned all or part of an original covered loan or did not accept the full amount of an original covered loan may reapply or request a modification of an existing loan.

IRS Guidance on PPP and Business Deductions 

Updated guidance (Rev. Rul. 2021-2) from the Internal Revenue Service issued yesterday provides that borrowers can now claim business expense deductions for payroll and other costs covered by Paycheck Protection Program loans. The new ruling revokes (“obsoletes”) previous IRS guidance and was mandated by the new COVID relief law. The ruling provides no benefit to tax-exempt employers except perhaps to the extent some expenses could cancel out unrelated business taxable income.

More PPP Resources:

  • What Maine businesses need to know about the new round of federal loans BDN
  • State income tax issue looms over pandemic relief loan recipients PPH
  • Latest Virus Relief Provisions Add To State Tax Uncertainty Law360

Economic Injury Disaster Loans (EIDL)

On December 30, 2020, the Small Business Administration (SBA) extended the deadline to apply for Economic Injury Disaster Loans (EIDLs) from December 31, 2020 to December 31, 2021, pending the availability of funds. Administered directly through the SBA, EIDLs provide qualified borrowers with economic relief through long-term 30-year financing with interest rates ranging from 2.75% (not-for profit businesses only).

The $10,000 EIDL advance provided by the SBA will no longer (as under prior law) reduce the amount of PPP loan forgiveness.


While MANP curates its information from many trustworthy sources, we are not a substitute for legal or accounting advice. Please discuss your specific situation with your lender and bookkeeper. For questions related to COVID relief for nonprofits in either the CARES Act or the Consolidated Appropriations Act, please feel free to also reach out to Sarah Woodard, MANP’s Advocacy + Public Affairs Director, at

Sources: National Council of Nonprofits, SBA, IRS, JD Supra, Wipfli

2 thoughts on “Guidance on Second Round of PPP, EIDL Loans and Grants

Is there a 2nd round of EIDL? I received the first round and it helped immensely.

Sarah Skillin Woodard says:

Hi, Teresa. Thank you for your question. Yes, both the EIDL loan and advance are open again. The same eligibility and benefits apply. Visit the SBA website for more information:

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