Second PPP Loan 2.0 Revenue Reduction Requirement Rule
In order to get the second PPP loan, you must show a revenue reduction of at least 25% loss in revenue of 2020 compared to 2019. But did you know that there are five different ways of calculating this revenue reduction? That’s what we’re going to talk about in this video. Hello from FreedomTax Accounting, we’re an accounting firm where we have been providing quality tax and accounting services now for over 20 years, if you’re new to this channel, we provide strategies for small business owners so they can achieve their financial goals. Although for the last couple of months, we have been concentrating on providing information on the PPP.N E I D L loan programs. We are recording this video on January 11th, and we always emphasize the date of the recording of any video relating to PPP loan because of this program is. Constantly changing. So that’s the importance of subscribing to our channel that way you’re always up to date with the most current and accurate information about these SBA loans.
Now, what we’ll be talking about in this video, we will show you the five ways that are in the SBA rules. On how you can demonstrate at least 25% reduction in your revenue requirement in order to get the second PPP loan. And we will show you the revenue reduction calculation formula, and we will give an example.
So you know exactly what formula to use to show this revenue loss and make sure that you’re eligible to get the second PPP loan. Now, remember that you have to comply with three eligibility requirements in order to get the PPP second draw. The first one is that you previously had to receive a PPP, one loan and will and will, or has used the full amount of the authorized funds for your PPP.
So if you have not applied or received a first PPP loan, you cannot apply for a second PPP draw loan. You have, you can apply for a first one again, but you have to have received a first PPP loan in order to apply for the second one. The other eligibility requirement is you cannot have more than 300 employees.
Now, this is different than the first PPP that you have to have at least 500 less than 500. And the, and thirdly, and most importantly, you have to demonstrate at least 25% reduction in gross receipts between comparable quarters in 2019 and 2020. Now there are five days for in ways where you can show this 25, at least 25% reduction in revenue.
And we’re going to show you those five different ways okay? Now, remember. That for the PPP two loans that are $150,000 or less, you do not have to show documentation to show this reduction of revenue at time of application. All right. But you are going to have to show. The revenue reduction documentation at time of forgiveness.
If you’re going after a second PPP loan of $150,000 or higher, then. You must show documentation at time of application. Okay. Now let’s go to the first way. The first way of showing a revenue reduction for the second PPP loan is to compare the annual 2019 and 2020 receipts. This is if your business was operational.
In all four quarters of 2019, you can show a reduction of annual receipts of 25% or greater in 2020 compared to 2019. So if your business was operational, all four quarters of 2019, you can basically take your 2020 total annual income. And compare it with your 2019 total annual income. And if you have a revenue reduction of at least 25%, 2020, compared to 2019, you are eligible to get the second PPP loan.
The second way is to compare the same quarters of 2019 compared to the same quarter of 2020. So basically you take a quarter of 2020 and compare it with the same quarter of 2019. So basically first quarter of 20 with first quarter of 19 and so forth, okay? So you take a quarter in 2020 and compare it with the same quarter of 2019.
And to see if 2020 was at least 25% less than the same quarter in 2019, the third way is if your business was not operational in the first and second quarter of 2019, But your business was operational in the third and fourth quarter of 2019. You must show that your revenue in any quarter of 2020, we’re at least 25% lower than either the third or fourth quarters of 2019.
So you also have this option. The fourth way is if your business was not operational in the first, second and third quarter of 2019, but it was operational on the fourth quarter of 2019. If this is your case, you can demonstrate your revenue in any quarter. Of 2020 that’s any quarter of 2020, where at least 25% lower than the fourth quarter of 2019.
Okay. Now the fifth way you can show revenue reductionist if your business was not operational in 2019, but it was operational at least by February 15th. 2020. So if this is your case, you must demonstrate that your revenue in the second, third or fourth, quarter of 2020, where at least 25% lower than the first quarter of 2020.
So those are your five options. So. Let’s go to the formula on how to get the revenue reduction percentage. And basically, you need to take that the 2019 revenue, either the annual or the quarter, the quarter you’re going to use to compare. So you’re going to take your 2019 revenue. You subtract your 2020 revenue.
Then you divide it by the 2019 revenue. And you multiply by a hundred and don’t worry that we’re going to show you an example. So once again, 2019 revenue minus 2020 revenue divided by 2019 revenue and multiply by a hundred, but very important than when you are adding up your 2020 revenue you do not count the PPP one or the idol loan funds as income for 2020.
So if you got a PPP one, you do not add the amount you are on PPP, one as income for 2020. They’re saying if you got an idle loan, if you got an idol alone, you don’t add the IRO loan as income. Towards the fund of 2020. Now let’s do an example, right? So let’s say once again, this is the formula 2019 revenue minus 2020 revenue divided by 2019 revenue multiplied by a hundred.
Let’s give an example. Let’s say that we have for 2019, either annual or a quarter $60,000 for 2019. We sup, and for 2020, we have $40,000 once again, either the annual or the total revenue of a quarter. So that’s 60,000 for 2019 minus 40,000 for 2020 that’s, $20,000. Okay. Now you take the $20,000 and you divide it by the $60,000 that are the 2019 revenue that, that is going to give you 0.33.
You’ll multiply that by a hundred. So that’s a 33% reduction in revenue. So if you do a formula, if you make this calculation and it’s 25% or higher, then you are eligible to get. The second PPP loan. Now a lot of people are calling our office to ask if we are doing PPP one and PPP two application services.
Yes, we are now. But if you want us to do your PPP two application. Unfortunately, we’re going to have to do your 2019 and 2020 accounting. Why? Because we are going to have to certify the 25% reduction in revenue and we cannot certify it unless we do the accounting. Now we are providing consultations as well.
So you can call our office at (407) 344-1012 to set up your consultation right now, remember that we can also help you with doing your personal tax preparation and your business tax preparation. We are authorized by the IRS to do tax work in all 50 States of the U S. Okay. So thank you for watching this video.
Remember to subscribe to our channel and also watch this suggested video on why you may have to apply for the second PPP loan with a different bank. All right.
Thank you for watching.
God bless you. Bye-bye.