Second PPP Loan and Employee Retention Credit

With the President signing the Consolidated Appropriations Act on December 27, 2020, Small Businesses are now eligible for new aid. This Act provided a second PPP loan program for qualified businesses and amended the requirements for the Employee Retention Credit.

Second PPP Loan

To qualify for the second PPP Loan, businesses must:

  • have 300 or fewer employees,
  • have used the full amount of their first PPP prior to disbursement of the second PPP loan,
  • demonstrate at least a 25% reduction in gross receipts in the first, second, or third quarter of 2020, relative to the same 2019 quarter, and
  • attest that the loan is necessary to support ongoing operations

Generally, businesses can borrow up to 2.5 times their average monthly payroll costs for the 12-month period prior to the loan application or for calendar year 2019.  The maximum loan amount is $2 million, and for forgiveness purposes, the 60/40 cost split between payroll and non-payroll costs will continue to apply. We expect the application process to be very similar to the first PPP Loan program and we anticipate the SBA will start taking applications sometime in the next 2 weeks. If you intend to apply for the second round of loans, now is the time to prepare your application so you are ready to apply as soon as applications are being accepted and before the allocated funds are exhausted.

Employee Retention Credit

The Employer Retention Credit is a refundable tax credit against certain employment taxes equal to 50% of the qualified wages an eligible employer pays to employees within the qualifying period. With the adoption of the Consolidated Appropriations Act, this credit is now available to businesses that received PPP loans.

  • Did your business have a 50% reduction in revenue in any quarter in 2020 compared to the same quarter in 2019? (ERC 2020)
  • Did your business have a 20% reduction in revenue in the 1st quarter of 2021 compared to the 1st quarter of 2020? (ERC 2021)
  • Was your business subject to mandatory government shutdown at any point in 2020 due to COVID? (ERC 2020)

The credit is taken against the employer’s share of social security tax. In some cases, eligible employers can request an advance of the Employee Retention Credit by submitting Form 7200.

PPP Loans are available through March 31, 2021, or until the funds are gone. If you are interested in applying for a PPP loan or determining your eligibility for the Employee Retention Credit,  please contact Paul Jones or Ginny Maloney at 630-377-2900 for assistance.