PPP Loan 2 Eligibility Requirements | PPP Reduction in Revenue Formula
Before you apply for your second PPP loan, make sure you meet the PPP Second Draw eligibility requirements. In this video, we show you the PPP 2 reduction in revenue formula.
This video is intended for educational purposes and should not be taken as legal or tax advice. You should consult with your financial professionals about your unique financial situation before acting on anything discussed in these videos. Freedomtax Accounting and Multiservices Inc. is providing educational content to help small business owners become more aware of certain issues and topics, but we cannot give blanket advice to a broad audience. Freedomtax Accounting and Multiservices Inc. or its members cannot be held liable for any use or misuse of this content.
How to Calculate a 25% Reduction in Revenue for PPP 2
What is the 25% reduction in revenue criteria?
The 25% reduction in revenue criteria only applies to businesses applying for their second draw PPP loan. This new, second PPP loan means new eligibility requirements.
To apply, a business must have used up their first PPP loan, have no more than 300 employees, and show a 25% reduction in revenue from 2019 to 2020.
For loan amounts under $150,000, the 25% reduction needs to be proven during the forgiveness process. If your loan amount is greater than $150,000, you will need to prove it during the application process.
The 25 percent reduction in revenue is calculated one of two ways:
Comparing annual gross receipts between 2019 and 2020 as reported on a completed tax return
Comparing gross receipts in a quarter of 2020 with that same quarter in 2019
For businesses that started in 2020:
If a business started in 2020 and was operational on February 15, 2020, it is eligible for a second PPP loan. You must use Q1 2020 as your comparison period. The 25% reduction can be shown using Q2, Q3, or Q4 2020.