Paycheck Protection Program Second Draw Loan
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The Paycheck Protection Program (PPP) now allows certain eligible borrowers that previously received a PPP loan to apply for a Second Draw PPP Loan with the same general loan terms as their First Draw PPP Loan.
Second Draw PPP 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.
Maximum Loan Amount and Increased Assistance for Accommodation and Food Services Businesses
For most borrowers, the maximum loan amount of a Second Draw PPP Loan is 2.5x average monthly 2019 or 2020 payroll costs up to $2 million. For borrowers in the Accommodation and Food Services sector (use NAICS 72 to confirm), the maximum loan amount for a Second Draw PPP Loan is 3.5x average monthly 2019 or 2020 payroll costs up to $2 million.
The SBA will forgive loans if all employee retention criteria are met, and the funds are used for eligible expenses.
- PPP loans have an interest rate of 1%.
- Loans issued prior to June 5, 2020 have a maturity of two years. Loans issued after June 5, 2020 have a maturity of five years.
- Loan payments will be deferred for borrowers who apply for loan forgiveness until SBA remits the borrower's loan forgiveness amount to the lender. If a borrower does not apply for loan forgiveness, payments are deferred 10 months after the end of the covered period for the borrower’s loan forgiveness (either 8 weeks or 24 weeks).
- No collateral or personal guarantees are required.
- Neither the government nor lenders will charge small businesses any fees.
This video covers an overview of the Second Draw Paycheck Protection Program. Topics include: loan terms, use of funds, eligibility requirements, forgiveness and where to find the best resources.
PPP Second Draw Loan Eligibility
A borrower is generally eligible for a Second Draw PPP Loan if the borrower:
- Previously received a First Draw PPP 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 (Click for SBA Guidance)
PPP Second Draw Loan Planning Considerations
As you consider applying for a PPP Second Draw Loan, please keep in mind the following:
Loan Amount - In most cases, the maximum PPP Second Draw Loan you will be eligible for will be the amount of your first PPP Loan. However, for certain borrowers such as those in industries assigned to NAICS code 72, partnerships and seasonal employers, the maximum loan amount may be higher than your original loan.
Using 2019 or 2020 Payroll Costs - For most borrowers, your eligible loan amount is based on your average monthly payroll. Payroll costs can be determined using either 2019 or 2020 payroll costs. You will want to have the following documents available for the payroll cost year you are using when you log on to apply (only those IRS documents you prepared and filed for that period) and you will need to upload them at the end of the application process:
- IRS Form 941 (4 quarters) or 944 (Annual)
- IRS Form 1099s or 1096 (1099 income)
- IRS Form 1040, Schedule C (sole proprietors)
- IRS Form 1065 plus the K-1’s (partnerships)
- Federal Tax Return Schedule C
- Federal Tax Return Schedule F
- IRS Form 990
This short video details the documentation required for a second draw Paycheck Protection Program (PPP) loan.
Decrease in Receipts/Revenue: Loans of $150,000 or Less - While PPP Second Draw Loans require a 25% decrease in gross receipts/revenue, businesses that apply for a Second Draw Loan of $150,000 or less do not have to provide supporting documents until they later apply for forgiveness.
Decrease in Receipts/Revenue: Loans of More Than $150,000 - Businesses that apply for PPP Second Draw Loans over $150,000 will be required to provide documentation with their application supporting that gross receipts/revenue in any quarter of 2020 were at least 25% lower than the same quarter of 2019. Alternatively, businesses may compare annual gross receipts in 2020 with annual gross receipts in 2019. You will want to review SBA Guidance and FAQs before you log on to apply:
- More information on how to calculate gross receipts/revenue can be found on pages 6-8 and pages 21-24 of the SBA Interim Final Rule found here
- How to Calculate Revenue Reduction and Maximum Loan Amounts Including What Documentation to Provide (SBA Released 01-19-21)
Paycheck Protection Program Helpful Links
SBA Application for PPP Second Draw Loans – For Reference Only (Form 2483-SD SBA Released 01-08-21)
Overview of Second Draw Loans (SBA Released 12-09-20)
Frequently Asked Questions (SBA Released (12-09-20)
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