What to Know About First and Second-Draw PPP Loans

EPISODE 54: As a follow-up to Episode 53, Denny Ard provides a part two follow-up discussion of recently release guidance for Paycheck Protection Program (PPP) loans, specifically addressing the applications for first-draw and second-draw PPP loans and updates to loan forgiveness eligibility.



[00:00:09] JL: Welcome to today’s edition of DHG’s GrowthCast. I’m your host, John Locke. At DHG, our strength relies on our technical knowledge, our industry intelligence and our future focus. We understand business needs and are laser-focused on company goals. In this ever-changing world, DHG’s GrowthCast provides insights and thought-provoking conversations on topics and trends that address growth opportunities and challenges in the current and future marketplace.

Thanks for joining us as we discuss tomorrow's needs today.

[00:00:42] ANNOUNCER: The views and concepts expressed by today's panelists are their own and not those of Dixon Hughes Goodman LLP. Always consult the advice of your legal and financial professional before taking any action.


[00:00:58] JL: Welcome back to GrowthCast and Part 2 of our discussion, updating the recent developments in the government’s PPP loan program. We have Denny Ard back with us again. Denny, as you recall is a partner and leader of DHG’s solution lab. The last time Denny was with us, we discussed the most recent changes to the Payroll Protection Plan legislation. Today, Denny and I will discuss in more detail the two PPP applications that were released in early January. Again, Denny, welcome back.

[00:01:27] DA: Hey, John. Great to be back. It’s always great to get with you and talk about all of the updates and things happening with PPP.

[00:01:37] JL: Yeah. Well, let’s get right to it, Denny. What is the difference between those two applications that we alluded to earlier?

[00:01:46] DA: One application is really for first-time borrowers and the second application is really for borrowers who have really taken a second bite at the apple for the PPP loan. If you are a borrower out there and you haven’t borrowed, you can go out and borrow for the first time. Or if you are a borrower and participated in the first round, you have an option or potentially eligible to go for a second round.

[00:02:15] JL: Okay. Well, tell us about the rules of eligibility. Are they the same as they were back in March 2020 for this PPP loans?

[00:02:26] DA: For first-time borrowers, I think the rules are really the same as what came out under the CARES Act initially way back in March, April timeframe. It’s really less than 500 employees, you’re eligible. There are all kinds of affiliation roles associated with that. But I think the majority of that has really remained relatively unchanged. For those first-time borrowers, I would point out that there’s still — I know this cost of a lot of concern and sparked a lot of discussion about the need for the loan. I would just say that if you’re looking at getting a first loan and you’re coming back to try again, you still got that whole, “Is their current economic uncertainty that really makes the loan necessary to support the operations of your business?”

I think everything from the first loan is fairly consistent. There is still that certification out there about, “Hey! There’s economic uncertainty, we need it to sustain operations.” You still have to make that certification, so I did want to point that out because I think that would be a question. Now, I think that certification would change, right? We know a lot more today than we knew back in March and April, but I think they’re still uncertainty as to where we go with the — the virus is still out there and things really still not being back to normal pre-COVID times, John.

[00:03:57] JL: Right. Yeah. I hear a lot of people talking that did take out the loans. It’s now forgiveness payback time and little angst around that. Can you just share with us any changes that may have been made to the forgiveness of the PPP loans?

[00:04:14] DA: Yeah. Really forgiveness piece. They’ve come through and I think the intent is to really make sure that business can maximize forgiveness on PPPs. So they’ve added in a number of non-payroll expenses that you can use to qualify for forgiveness. Really, there’s covered operational expenditures out there, property damage cost, covered supplier cost, some workers protection type expenditures. So they’ve really gone through and added in new categories of expenses, John, that you can use. I think hopefully that’s beneficial for businesses out there to be able take advantage of and make sure that they’re maximizing forgiveness.

Another thing that I think will be very helpful is, they really simplified the forgiveness applications for some of the smaller dollar borrowers out there. If you have a loan that’s $150,000 or less, you’re eligible to use the simplified forgiveness application. I think it’s SBA form 3508S. Really in lieu of the longer form of the forgiveness applications. I think that really simplifies things for a lot of these smaller dollar borrowers. Those were the couple of the changes. As I think back and think about the application really, that second application is really for folks looking to take on that second draw, John.

Couple of things to point out there. One, that’s limited. A little bit different, the rules changed a little bit, but it’s less than 300 employees and you can show that you had a 25% or more declining gross receipts for any calendar quarter of 2020 when compared to 2019. So I wanted to make sure I mention that because that option is out there. But those rules are kind of new there and you have to really sort of pay attention and what are the computations there if you’re looking for the second draw.

[00:06:21] JL: Okay. Again, some of our listeners may be hearing this for the first time. They may not have applied for the first round of PPP or they’re looking at a second round. What should they do next? What’s the next step for those that are really now getting focused on this?

[00:06:36] DA: Really, I think the best steps are to go out to the treasury website and look at the forgiveness applications, really walk through the forgiveness applications. If you have questions out on those, reach out to your advisors, your CPAs, your accountants, your attorneys if necessary and also the lenders. I think it’s — my first step would be going out looking at the applications, taking a look at what they’re asking for, and then accumulating a list of questions and then leveraging my accountants, and attorneys and lenders to help me get the answers to those and go ahead and get the application submitted.

[00:07:14] JL: Great. Well, it’s an ever-changing world, ever evolving when you look at the information flow relative to PPP loan program. Denny, again, thanks to you and your team for staying on top of this and sharing your insights onto today’s GrowthCast.

[00:07:29] DA: Thank you, John. It’s been a long kind of wild ride, but I think there’s really opportunities for businesses out there and things for them to capitalize on. So it’s all really good stuff, so I look forward to coming back and sharing future updates with you as well.

[00:07:45] JL: Great.

End of Interview

[00:07:46] JL: Thank you, our listeners, for being with us today, and our guest, Denny Ard, partner and leader of DHG’s solution lab. We hope that Denny’s updates on the recent amendments to the PPP loan program provide you with the information you need to help your business navigate through this challenging COVID-19 economy. I’m your host, John Locke, and I look forward to reconnecting with you soon on another episode of DHG GrowthCast.

End of Episode
About DHG's GrowthCast

At DHG, our strength lies in our technical knowledge, our industry intelligence and our future focus. We understand business needs and are laser focused on company goals. In this ever-changing world, DHG’s Growthcast, provides insights and thought -provoking conversations on topics and trends that address growth opportunities and challenges in the current and future marketplace. Join us in discussing tomorrow’s needs today.

Disclaimer: The views and concepts expressed by today’s guests are their own and not those of Dixon Hughes Goodman LLP. Always consult with your legal and financial professional before taking any action.


Denny Ard
Managing Partner, DHG Solutions Lab


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