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3 Ways Second Draw PPP Is Designed to Help Small Businesses

It’s hard to believe it’s been almost a year since the coronavirus pandemic took hold and disrupted every corner of daily life— Main Street being one of them. The past months brought unprecedented strife for small businesses, and the small business owners that have managed to keep their doors open are fighting hard to keep it that way.

Thankfully, with the signing of the stimulus bill in December, some relief is now available: a new round of federal aid including new loans through the Paycheck Protection Program (PPP) for small business owners.

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“The second draw PPP loans are meant to better support smaller businesses—the folks most negatively affected by this pandemic.”

I work at Nav, a company that helps small businesses secure financing. In 2020 our team was able to help over 6,000 of them secure loans through the PPP — but we also saw the program fall short for far too many.

Nav recently conducted a survey that revealed only 36 percent of the smallest U.S. businesses applied for the PPP, versus 61 percent of mid-sized businesses. And, many of these smallest businesses reported opting out of the process entirely due to the time and resources needed to apply.

Luckily, changes to eligibility requirements make it clear that second draw PPP loans are meant to better support smaller businesses—the folks most negatively affected by this pandemic.


Here are three ways that the second draw PPP loans will be more favorable for the smallest businesses, and encouragement for small business owners to pursue this new funding while it’s available:

1. Loan Amounts Recognize Hardest Hit Small Businesses

To be clear, if you did not get a PPP loan yet, you may qualify for a “first draw” loan under the original terms of the CARES Act. But if you already received one and your business is still struggling, your business may qualify for a second draw loan.

The maximum loan amount for this second loan is $2 million, which should help prevent funding from being gobbled up by larger businesses.

What’s more, this time around, for small businesses to be eligible for the loan, not only must they qualify as a small business according to SBA industry revenue standards, but they also must employ fewer than 300 employees, and have suffered at least a 25% gross revenue reduction in at least one 2020 quarter compared to last year.

Finally, businesses in the food service and accommodations industry – businesses with NAICS codes starting in 72— may qualify for a slightly larger loan (3.5 times average monthly payroll, versus 2.5 times average monthly payroll for other applicants.)

ppp funding infographic

2. Expansion of Eligible Expenses 

As made evident by its name, the primary purpose of the Paycheck Protection Program is to provide relief to businesses so employees, and even business owners themselves, can stay on payroll. To obtain full forgiveness, borrowers must spend 60% or more of the loan on qualified payroll expenses. This is true of both the first and second round.

What’s different this time around, though, is that loan proceeds can be spent on a longer list of eligible non-payroll expenses that include covered operations expenditures (like a new online ordering system) or covered worker protection expenditures (like PPE). This is important because, for many small businesses, these are costs that weigh heavily on some businesses.

3. Favorable Tax Changes for Small Businesses 

With the latest round of federal aid, neither PPP funds nor EIDL grants can be taxed. Before EIDL grants were taxable and businesses could not deduct expenses paid for with PPP funds. Borrowers who got an EIDL grant had to deduct this amount from their PPP loan for forgiveness purposes, effectively saddling them with a loan for that amount. Now, that will be eliminated retroactively.

While these changes of the second round of PPP are significant, there will be some businesses that don’t qualify or even bother to apply. This includes startups or companies that don’t have the time and resources to apply.

For businesses that fall into this category, know that there are other options out there, including pandemic unemployment benefits, SBA debt relief Minority Development Institutions and Community Development Institutions.

Now, more than ever, small businesses need support to stay afloat. With the second round of PPP available, there’s a glimmer of hope for small businesses owners and the future of our economy. I encourage owners of eligible small businesses to get their bookkeeping in order and start the process as soon as possible.

Gerri_headshot pppGerri Detweiler, Education Director at Nav

Gerri Detweiler has more than 20 years of experience guiding individuals through the confusing world of credit. She serves as Education Director for Nav, the simple and intelligent financing platform for small businesses, where she develops educational programs and content for entrepreneurs and works on advocacy issues.

Gerri contributes regular columns to, Forbes and Home Business Magazine. Her articles have also been featured on Yahoo!, MSN Money,,,, The Today Show website, and many others. She is also the author or co-author of five books and hosted her own talk radio programs. She has also appeared multiple times on Fox Business, CNN and other nationally televised programs.

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