Second Draw PPP Loan Applications & Eligibility Issues


American paper money on black surface

On March 11, 2021, President Biden signed into law the American Rescue Plan Act. Among many other things, the law extended the Paycheck Protection Program (PPP) loan application deadline from March 31, 2021 to May 31, 2021 for both First Draw and Second Draw Paycheck Protection Program loans.

Are you eligible for a Second Draw PPP loan?

If you are considering applying for a Second Draw PPP loan, you should know that a Second Draw loan is subject to additional eligibility requirements compared to the First Draw PPP loan you already received. The first requirement of requesting a Second Draw PPP loan is that the applicant must “have used or will use the full amount of the initial PPP loan for authorized purposes on or before the expected date of disbursement of the Second Draw PPP loan.”

Considering Applying for a Second Draw PPP Loan?

It is important to note a few things regarding this requirement if you are considering applying for a Second Draw PPP loan:

  1. It is best practice to have used the entirety of the First Draw PPP loan at the time that you apply for the Second Draw PPP loan. Doing so prevents any eligibility issues that could arise due to unforeseeable circumstances that prevent using the funds on authorized purposes before the disbursement date of the Second Draw loan.
  2. This requirement does not simply mandate spending the money prior to disbursement of the Second Draw loan – it requires use of “the full amount . . . for authorized purposes.” When you apply, you have to understand that if, for example, it later turns out that you accidentally used any portion of your First Draw PPP loan for something that did not qualify as an authorized purpose, your Second Draw PPP lender and/or the Small Business Administration (“SBA”) could take the position that you were not eligible for the loan. This could have several severe consequences, including that (1) the lender will declare the full amount of your Second Draw loan immediately due and payable, and (2) no portion of the Second Draw loan will be forgiven.

As the Paycheck Protection Program has evolved, “authorized purposes” for which PPP loan proceeds could be used have changed several times and the changes have been significant. Prior to applying for a Second Draw PPP loan, you should understand whether or not you have used “the full amount . . . for authorized purposes” and the potential issues you may face if your PPP lender or the SBA disagrees with you.

Nolan Heller Kauffman Is Here To Help

If you have questions or concerns regarding the Paycheck Protection Program, PPP authorized purposes, or specific issues relating to Second Draw PPP loans, please contact Matthew M. Zapala, Esq., by email ( or phone (518.432.3133) for a no-cost consultation to see how Nolan Heller Kauffman LLP may be able to assist with any of your Paycheck Protection Program questions, concerns and applications.