UPDATED ON 1/13/21


Is forgiveness available for PPP-2 loans?

Yes. The forgiveness calculation and process is similar for PPP-2 loans as for the first round of funding.

Importantly, the use of funds is expanded to cover additional areas including operations expenses, property damage costs, supplier costs and worker protection expenses.

Previously only payroll, rent, utilities and interest were eligible expenses for use and forgiveness.

Has the SBA issued guidance on PPP-2?

On 1/6/2021, the SBA issued an Interim Final Rule (IFR) on the Paycheck Protection Program as Amended by Economic Aid Act.

What is the deadline for the PPP-2 application?

All applications (PPP2 and first time PPP1 borrowers) must be made by 3/31/2021.

When does the application window begin?

PPP applications will re-open the week of 1/11/2021 for new borrowers and certain existing PPP borrowers. Community financial institutions will be able to make PPP-1 Loans on 1/11/2021, and PPP-2 Loans on 1/13/2021. The PPP will open to all participating lenders shortly thereafter.

Are eligibility requirements different for PPP-2?

Yes. Eligibility requirements for the second round of PPP (non-first time borrowers) are more stringent.

Generally, borrowers must only employ 300 or fewer employees (previously 500). For businesses with multiple locations, the rule is applied on a per location basis.

A second requirement is that borrowers must have experienced a 25-percent or more drop in gross receipts in any quarter in 2020 compared to the same quarter in 2019. A borrower that was in operation in all four quarters of 2019 may elect to compare total annual receipts in 2020 to annual receipts in 2019 rather than performing a quarter-by-quarter comparison. Borrowers will have to submit copies of annual tax forms substantiating the revenue decline.

PPP-2 funding is available regardless of whether first round funding was received or forgiven. However, borrowers with first round (PPP-1) funding must have exhausted or will exhaust the full amount of those funds on or before the expected date on which PPP-2 will be disbursed in order to be eligible for a second draw. A portion of funding is also reserved for first time PPP borrowers.

Note, entities receiving Shuttered Venue Operator grants are ineligible for PPP.

Are expenses met with forgivable/forgiven loans now deductible?

Yes. Expenses met with PPP funding that was or is expected to be forgiven are now tax deductible at the Federal level.

This will apply to borrowers who have met forgiveness criteria, regardless of whether they have applied or been granted forgiveness. It remains to be seen whether States will also follow in allowing deductibility.

Has the SBA defined gross receipts?

The SBA defines gross receipts as all revenue in any form received or accrued (in accordance with the borrower’s accounting policies) from all source including:

  • Sales of products or services
  • Interest, dividends
  • Rents
  • Royalties
  • Fees
  • Commissions
  • Reduced by returns and allowances

For nonprofit organizations, gross receipts has the meaning in section 6033 of the Internal Revenue Code of 1986.

Note: If PPP-1 forgiveness is recorded in calendar year 2020 revenue it is excluded from the gross receipts comparison. Further, EIDL grants are to be excluded from gross receipts.

How is funding determined?

PPP-2 loan amounts are generally to be calculated by 2.5x average monthly payroll in either (i) 2019 (ii) 2020 or (iii) the 12-month period prior to application.

Separate determination for:

  • Restaurants, Hotels, etc. (NAICS Code 72): 3.5 x average monthly payroll costs.
  • Seasonal borrowers: payroll costs during any 12-week period between 2/15/2019-2/15/2020.

What is the maximum loan amount available?

PPP-2 borrowing is capped at $2 million.

For businesses that are part of a corporate group, the PPP-2 cap is $4 million.

How is the covered period defined under PPP-2?

At the borrower’s choice, any time frame between eight and twenty-four weeks from the date of funding.

How are PPP-2 funds restricted?

PPP-2 funds must be used on payroll costs and other qualifying expenses.

Qualifying expenses have been expanded to include various categories of operating expenses (software, cloud computing, other HR/accounting), supplier costs, property damage costs and certain worker-protection expenses.

Note, these expanded eligible costs now apply to PPP1 loans as well.

How much of PPP-2 funds must be spent on payroll?

Same as the first round of PPP, payroll costs must account for at least 60 percent of total forgiveness.

Will and EIDL grant reduce forgiveness?

Forgiveness will not be reduced for EIDL grants received, as they were in the first found of PPP funding.

Will salary and headcount reductions impact forgiveness?

Yes. Salary and FTE reductions will continue to be part of the forgiveness considerations.

Does the forgiveness application for the first round of PPP need to be submitted prior to applying for PPP-2?

No. Borrowers can apply for PPP-2 prior to submitting forgiveness applications for the first round of PPP.

Is the forgiveness application for PPP-2 streamlined?

A streamlined forgiveness process is available for borrowers of $150,000 or less.

Has the new bill amended any of the forgiveness guidance on the first round of PPP?

Yes. Particularly the expansion of qualifying non-payroll expenses as defined above.

Are there any special considerations for specific niches?


Food and Beverage (business with NAICS code beginning 72): Can be funded 3.5x 2019 average monthly payroll (2.5x for all other industries and still capped at $2 million). Maximum employee threshold is also increased from 300 to 500 for food and beverage borrowers.

Entertainment and Culture: The Bill provides for $15 billion of funding to live venues, movie theatres, cultural institutions and other similar businesses.

Nonprofits: Eligibility is expanded to 501(c)(6) organizations where there are no more than 150 employees (as well as other qualification criteria).

If you have any questions on the above, GHJ’s COVID-19 Response Team has as an experienced team of consultants specializing in COVID-related laws and programs and can provide the tools your business needs to help it recover from this business disruption. We are here to assist organizations to succeed in these very challenging times.


Elad Menna

Elad Menna, CPA, is a member of GHJ’s Audit and Assurance Practice with over nine years of accounting experience and specializes in assurance services for food and beverage and manufacturing clients. Elad also services clients within the technology (SaaS), media and entertainment and nonprofit…Learn More

Sutton David main

David Sutton

David Sutton is GHJ’s Private Equity Practice Leader and serves clients across the U.S. that range from small family offices to established multi-disciplinary funds. He has more than 15 years of experience across finance, restructuring, and mergers and acquisitions. David’s deal experience includes…Learn More