PPP Second Draw

Borrowers who already received a PPP loan may apply for a second loan called a PPP Second Draw. This a new PPP loan and requires submitting a new loan application.

We will accept applications beginning Tuesday, January 19. To get started, please submit a completed PPP Second Draw Borrower Application Form and required payroll documentation to your First Interstate Relationship Manager.

An applicant who files an IRS Form 1040, Schedule C, and uses gross income to calculate PPP loan amount may apply using the PPP Second Draw Borrower Application Form – Schedule C Filers.

What are the loan details?

The loan terms and forgiveness requirements are the same as a First Draw PPP loan:

• 1.0% fixed interest rate
• 5-year maturity
• No collateral or personal guarantees required
• No borrower fees
• 100% SBA guarantee

Loan payments are deferred for borrowers who apply for loan forgiveness until the SBA remits the forgiveness amount to the Bank. If a borrower does not apply for forgiveness, payments are deferred 10 months after the end of the 24-week covered period from the date of loan disbursement.

What businesses are eligible?

Businesses, certain nonprofit organizations, housing cooperatives, veterans’ organizations, tribal businesses, certain eligible 501(c)(6) organizations, destination marketing organizations, certain nonprofit news organizations, self-employed individuals, sole proprietors, independent contractors, and small agricultural co-operatives are eligible.

To be eligible, businesses must:

• Employ 300 or fewer employees*;
• Have used or will use their first PPP loan; and
• Demonstrate a 25% reduction in revenue in any quarter in 2020 compared to the same quarter in 2019.
• Have been in operation on February 15, 2020.
• Have spent the full amount of their initial PPP loan on eligible expenses under PPP rules.
• Not be permanently closed. However, a borrower that has temporarily closed or temporarily suspended its business is eligible.

*Businesses with multiple locations that are eligible entities under the initial PPP requirements may not have more than 300 employees per physical location.

What do I need to apply?

In addition to a completed and signed PPP Second Draw Borrower Application Form, the following documentation is required.

• Form 941 from calendar year 2019 or 2020 (or other tax forms containing similar information).
  • If you are self-employed, please provide your completed 2019 or 2020 Schedule C and Form 1099-MISC detailing nonemployee compensation received. A Schedule F is acceptable for farm income.
• State quarterly wage unemployment insurance tax reporting forms from 2019 or 2020, or equivalent payroll processor records.
• Supplemental information such as employer paid benefit statements to support any additional payroll expense. These include benefits such as health and retirement plans.
• Payroll statement or similar documentation from the pay period that covered February 15, 2020, to show you were in operation on February 15, 2020.
• Verification of a 25% reduction in revenue in any quarter of 2020 compared to the same quarter in 2019. This may include relevant tax forms, including annual tax forms, or, if relevant tax forms are not available, a copy of the applicant’s quarterly income statements or bank statements.

If you received your PPP loan through First Interstate, we already have most of the documentation required to apply. However, we will need documentation showing a 25% reduction in revenue in any quarter of 2020 compared to 2019. This may include relevant tax forms, including annual tax forms, or, if relevant tax forms are not available, a copy of your quarterly income statements or bank statements. 

What is the maximum loan amount? How is it calculated?

Borrowers may receive a loan up to 2.5 times the average monthly payroll costs from calendar year 2020. Accommodations and Food Services Businesses (with an NAICS code 72) may receive up to 3.5 times average monthly payroll.

The loans are capped at $2 million and are subject to application approval. Here’s how to calculate the amount for which you are eligible:

• Aggregate payroll costs from calendar year 2020 for employees whose principal place of residence is in the United States. If self-employed, use Line 31—Net Profit Amount—from your 2019 Schedule C.
• Subtract any compensation paid to an employee in excess of an annual salary of $100,000, and/or any amounts paid to an independent contractor or sole proprietor in excess of $100,000 per year
• Divide that amount by 12 to calculate average monthly payroll costs
• Multiply average monthly payroll costs by 2.5 (or 3.5 if NAICS code 72)

How is the 25% revenue reduction calculated?  

To be eligible for a Second Draw PPP Loan, the borrower must have experienced a revenue reduction of 25% or greater in 2020 relative to 2019. This is calculated by comparing the borrower’s quarterly gross receipts for one quarter in 2020 with the borrower’s gross receipts for the corresponding quarter of 2019. 

Are Second Draw PPP loans eligible for forgiveness?

Borrowers of a PPP second draw loan are eligible for loan forgiveness equal to the sum of their payroll costs, as well as covered mortgage, rent, and utility payments, covered operations expenditures, covered property damage costs, covered supplier costs, and covered worker protection expenditures incurred during the 24-week covered period. At least 60% of the loan proceeds must be spent on payroll costs in order to receive full forgiveness.

If I apply for and receive a PPP Second Draw, is that amount added to my previous PPP loan or is it a new loan? 

The PPP Second Draw is an entirely new loan, separate from your First Draw PPP. You will also separately apply for forgiveness for the Second Draw loan. 

Loan Forgiveness

Your PPP loan may be eligible for forgiveness if the proceeds were spent on payroll, mortgage interest, rent, or utilities paid or incurred during the 24 weeks after loan disbursement.

First Interstate will begin accepting forgiveness applications for First and Second Draw PPP loans originated in 2021 in the coming weeks. We will contact borrowers directly with next steps and instructions to access our online forgiveness portal. In the meantime, we recommend reviewing the forgiveness requirements and collecting any needed documentation.

Forgiveness Applications

The SBA has released three forms and instructions borrowers may use to apply for forgiveness. Please do not complete the PDF version of these applications; First Interstate only accepts applications submitted through our online forgiveness portal. However, it’s a good idea to review the applications to determine which form best meets your needs, as well as what documentation is required.

SBA Form 3508  |  SBA Form 3508EZ  |  SBA Form 3508S

You may submit the 3508S application if your PPP loan or combined loans total $150,000 or less. SBA Form 2508S requires fewer calculations and less documentation.

You may submit the EZ Forgiveness Application if you:

• Are self-employed and have no employees; OR
• Did not reduce the salaries or wages of employees by more than 25% AND did not reduce the number or hours of your employees; OR
• Did not reduce the salaries or wages of your employees by more than 25% AND experienced reductions in business activity because of health directives related to COVID-19. For example, if your business was closed during all or part of the covered period, but you continued to pay employees at least 75% of their usual pay, you are eligible to use the EZ Forgiveness Application.

Forgiveness Requirements

For all or a portion of the PPP loan to be eligible for forgiveness, borrowers must:

• Use the loan for eligible expenses.
• Spend at least 60% of the loan on payroll costs.
• Spend the loan proceeds during the 24 weeks starting on the date the loan is disbursed, or by March 31, 2021—whichever comes sooner.
• Keep the same number of full-time equivalent (FTE) employees on the payroll. There are exceptions for employees who decline a good faith rehire offer,
• Maintain at least 75% of the salary or wages of individual employees during the covered period.

Expenses eligible for forgiveness include:

• Payroll costs, including salary, wages, commissions, or tips. Payroll costs are capped at $100,000 on an annualized basis for each employee.
• Employee benefits including costs for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payments required for the provisions of group health care benefits, including insurance premiums; and payment of any retirement benefit
• State and local taxes assessed on compensation
• Mortgage interest payments (but not prepayments or principal payments)
• Interest payments on other debts incurred before February 15, 2020
• Rent and utilities payments
• Certain operational costs, such as software, cloud computing, and other human resources and accounting needs
• Property damage costs due to public disturbances that occurred during 2020 that are not covered by insurance
• Supplier costs for goods essential to the business or purchased under contract
• Worker protection expenditures (PPE) or costs related to complying with COVID-19 health requirements

The following related expenses are not eligible for forgiveness:

• Compensation to employees whose principal place of residence is outside the United States
• For each individual employee, total pay exceeding an annual salary of $100,000, as prorated for the covered period
• Federal employment taxes imposed or withheld between February 15, 2020 and June 30, 2020
• Qualified sick and family leave wages for which a credit is allowed under sections 7001 and 7003 of the Families First Coronavirus Response Act

Timing of Expenses

The SBA has allowed some flexibility in timing for the use of PPP funds. Businesses may seek forgiveness for payroll costs paid or incurred during the 24 weeks beginning on either: 

• The date you receive the funds ("covered period”), or
• The first day of the first payroll cycle in the covered period (“alternate covered period”)  

The PPP Flexibility Act extended the covered period from eight weeks to 24; however, businesses may choose to use an eight-week period.

Payroll costs paid or incurred during the 24-week period are eligible for forgiveness. Payroll costs incurred during the eight-week period are eligible for forgiveness if paid on or before the next regular payroll date. Otherwise, they must be paid during the 24 weeks. Payroll costs are considered “paid” on the day paychecks are distributed or your business originates an ACH credit transaction. They are considered “incurred” on the day the employee earned the pay. Mortgage interest, rent, and utilities need to be paid during the covered period or paid on or before the next regular billing date, even if the billing date is after the covered period.

Forgiveness Amount Reductions

The forgiveness amount is reduced if the salary or hourly wages of employees who make less than $100,000 annually was reduced by more than 25 percent during the covered period. 

The forgiveness amount also is reduced if the business reduces its average full-time equivalent (FTE) employees. The following may be excluded if you didn’t hire a replacement: 

• Employees who declined a good faith, written rehire offer. 
• Employees who were fired for cause, voluntarily resigned, or voluntarily requested and received a reduction of hours.

The SBA has extended “safe harbor” to businesses that rehire employees by December 31, 2020. You may be exempt from the FTE reduction if these two conditions are met: 

• You reduced the business’ FTE levels between February 15 and March 31, 2020
• You restored the business’ FTE levels by December 31, 2020, to the FTE levels in the pay period that ended February 15, 2020

Required Documents

When you apply for forgiveness, you will need to submit documents verifying eligible expenses and full-time equivalent employees, as well as each employee’s salary or wages. The SBA requires all records related to your PPP loan be saved for six years after the loan is forgiven or repaid in full.

Please note: Borrowers with a PPP loan or combined loans totaling $150,000 or less may submit SBA Form 2508S, which requires less documentation. However, the SBA requires borrowers to retain the following documents.

Payroll Documentation: You’ll need to include documents verifying the eligible compensation and benefit payments, including:

• Bank account statements or third-party payroll service provider reports showing cash compensation paid to employees.
• Tax forms (or third-party payroll service provider reports) for the periods that overlap the with the loan forgiveness period:
  • Payroll tax filings reported, or that will be reported, to the IRS (typically, Form 941); and
  • State quarterly business and individual employee wage reporting and unemployment insurance tax filings reported, or that will be reported, to the state.
• Payment receipts, cancelled checks, or account statements documenting employer contributions to employee health insurance and retirement plans.

FTE Documentation: If you reduced the number of full-time equivalent (FTE) employees or you reduced the salary or wages of any individual employee by more than 25%, you’ll need to document:

• The average number of FTE employees on payroll per week between February 15 and June 30, 2019; OR
• The average number of FTE employees on payroll per week between January 1 and February 29, 2020; OR
• If you’re a seasonal employer, either of these two date ranges or any consecutive 12-week period between May 1 and September 15, 2019.

Documents may include:

• Payroll tax filings reported, or that will be reported, to the IRS (typically, Form 941); and
• State quarterly business and individual employee wage reporting and unemployment insurance tax filings reported, or that will be reported, to the relevant state.

If you did not reduce FTE or salary/wages, or you have no employees, you may use Form EZ and this documentation is not required with the application.

Nonpayroll Documentation: You’ll need to verify the existence of a mortgage, lease, or utilities prior to February 15, 2020, and payments made during the forgiveness period:

Business mortgage interest payments

• Copy of lender amortization schedule and receipts or cancelled checks verifying eligible payments from the forgiveness period; OR
• Lender account statements verifying interest amounts and eligible payments from February 2020 and the months of the forgiveness period through one month after this period

Business rent or lease payments

• Copy of current lease agreement and receipts or cancelled checks verifying eligible payments during the forgiveness period; OR
• Account statements verifying eligible payments from February 2020 and the forgiveness period through one month after this period

Business utility payments

• Copy of invoices from February 2020 and those paid during the forgiveness period and receipts, cancelled checks, or account statements verifying those eligible payments

Covered operations expenditures

• Copy of invoices, orders, or purchase orders paid during the covered period; and
• Receipts, cancelled checks, or account statements verifying those eligible payments.

Covered property damage costs

• Copy of invoices, orders, or purchase orders paid during the covered period; and
• Receipts, cancelled checks, or account statements verifying those eligible payments; and
• Documentation showing the costs were related to property damage and vandalism or looting due to public disturbances that occurred during 2020 and that such costs were not covered by insurance or other compensation.

Covered supplier costs

• Copy of contracts, orders, or purchase orders in effect at any time before the covered (except for perishable goods); and
• Copy of invoices, orders, or purchase orders paid during the covered period; and
• Receipts, cancelled checks, or account statements verifying those eligible payments.

Covered worker protection expenditures

• Copy of invoices, orders, or purchase orders paid during the covered period; and
• Receipts, cancelled checks, or account statements verifying those eligible payments; and
• Documentation showing the expenditures were used by the borrower to comply with applicable COVID-19 guidance during the covered period.