PPP Second Draw Readiness Guide

PPP2 Readiness Guide

For further clarification and the latest information, please review the visit the US Treasury website.

What’s a qualifying business?

Sole proprietors, independent contractors, self-employed individual, and small businesses with fewer than 300 employees. Qualifying tax-exempt nonprofit organizations are eligible for participation, as well.

How can these funds be used?

  • Payroll costs (salary, wages, commission, tips)
  • Non-payroll costs
    • Employee benefits (healthcare and retirement benefits, as well as group life, disability, vision, or dental insurance)
    • Mortgage interest payments (not including payments on the mortgage principal)
    • Rent
    • Utilities
    • Covered operations expenditures (business software or cloud services that facilitate business operations including payroll processing, sales & billing and other accounting expenses)
    • Covered property damage costs (related to property damage and vandalism or looting due to public disturbances that occurred during 2020 not covered by insurance or other compensation);’
    • Covered supplier costs (those that are essential to the operations of the entity at the time at which the expenditure is made and are made pursuant to a contract or purchase order)
    • Covered worker protection expenditure (an operating or capital expenditure to facilitate the adaptation of your business activities to comply with pandemic requirements or guidance from federal, state or local governments)

Borrowers who use loan proceeds to cover these costs will be 100% forgiven if at least 60% of the loan is used toward qualifying payroll costs and the rest of the loan is used toward the other uses listed above (also known as “non-payroll costs”). If funds go toward any non-covered expenses, then that portion will not be forgiven.

How do you calculate your average monthly payroll or income?

If you’re an employer, it’s payroll. Non-employers will calculate income.

For all employers
Don’t include gross yearly payroll costs over $100,000 for each employee. Also, continue to exclude compensation of an employee whose principal residence is outside of the US.

For most employers
Take your annual payroll costs (see Note 1) and divide them by 12. “Annual” can mean either 2019 or the last 12 months.

For seasonal employers
Determine average monthly payroll using any 12-week period between February 15, 2019 and February 15, 2020.

For new employers
For employers not in business for the 1-year period prior to February 15, 2020, divide the sum of all payroll costs paid or incurred by the number of months in which the payroll costs were paid or incurred before February 15, 2020. 

For non-employers
Yearly business income up to $100,000 can be counted as payroll for sole proprietorships without employees, independent contractors, and self-employed individuals.

For farmers and ranchers
Yearly gross income up to $100,000 can be counted as payroll for Schedule F filers without employees and as a part of payroll costs for farmers with employees.

(Note 1) Annual payroll costs include the following kinds of payments made to W-2 employees:
• Gross pay (e.g., salary, wages, paid leave, sick pay)
• Employer-paid state and local taxes (e.g., state unemployment tax)
• Healthcare benefits
• Retirement benefits

How do you show your business was operational?

If you’re an employer
Reports from your payroll provider that include February 2020 or pay stubs from February 2020 should be sufficient.

If you don’t employ anyone
If you don’t employ anyone (your business didn’t file a W-2 for any employee including yourself), we may ask you to provide a utility bill, lease, bank account statement, or payroll processor statement with your business name from February 2020.