PPP Loan Revenue Reduction Guidelines
Many business owners believe to qualify for a Paycheck Protection Program loan, they need a 25% reduction in gross revenue in EACH QUARTER of 2020 when compared to 2019. This is not the case. To qualify, a business or non-profit organization needs only to have a 25% reduction in gross revenue during ONE QUARTER of 2020 when compared to the same quarter in 2019 OR a 25% reduction in gross revenue for all of 2020 vs all of 2019.
If your business or non-profit entity wasn’t open during all of 2019, the following guidelines will apply:
- For entities not in business during the first and second quarters of 2019 but in operation during the third and fourth quarters of 2019, applicants must demonstrate that gross receipts in any quarter of 2020 were at least 25% lower than during either the third or fourth quarters of 2019.
- For entities not in business during the first, second, and third quarters of 2019 but in operation during the fourth quarter of 2019, applicants must demonstrate that gross receipts in any quarter of 2020 were at least 25% lower than the fourth quarter of 2019.
- For entities not in business during 2019 but in operation on February 15, 2020, Applicants must demonstrate that gross receipts in the second, third, or fourth quarter of 2020 were at least 25% lower than the first quarter of 2020.
To document that your business experienced at least a 25% reduction in gross receipts, the SBA will accept the following for your business entity:
- Quarterly Financial Statements If the financial statements are not audited, the applicant must sign and date the first page of the financial statement and initial all other pages, attesting to their accuracy. If the financial statements do not specifically identify the line item(s) that constitute gross receipts, the applicant must highlight them.
- Quarterly or Monthly Bank Statements These must show deposits from the relevant quarters. The applicant must demonstrate, if it is not clear, which deposits listed on the bank statement constitute gross receipts (e.g., payments received for goods and services) and which do not (e.g., capital infusions).
- Annual IRS Income Tax Filings These are required documentation if you are comparing annual revenue decline for 2020 compared to 2019. If you have not yet filed a tax return for 2020, you must fill out the return forms, compute the relevant gross receipts value as outlined below, and sign and date the return, attesting that the values that enter into the gross receipts computation are the same values that will be filed on the entity’s tax return.
If you use your entity’s annual income tax returns to demonstrate a gross receipts reduction of at least 25%, the amounts required to compute gross receipts will vary by your tax return type:
- Self-employed individuals other than farmers and ranchers will use the sum of line 4 and line 75 found on IRS Form 1040 Schedule C
- Self-employed farmers and ranchers will use the sum of lines 1b and 9 found on IRS Form 1040 Schedule F
- Partnerships will use the sum of lines 2 and 8, minus line 6 found on IRS Form 1065
- S-Corporations will use the sum of lines 2 and 6, minus line 4 found on IRS Form 1120-S
- C-Corporations will use the sum of lines 2 and 11, minus the sum of lines 8 and 9 found on IRS Form 1120
- Nonprofit organizations will use the sum of lines 6b(i), 6b(ii), 7b(i), 7b(ii), 8b, 9b, 10b, and 12 (column (A)) of Part VIII found on IRS Form 990 or if filing IRS Form 990-EZ then use the sum of lines 5b, 6c, 7b, and 9 of Part I.
- LLCs should follow the instructions that apply to their tax filing status in the reference periods
ENB is now accepting PPP loan applications. If you’d like to apply, please use our online application or call our PPP Loan Team at (717) 721-5205 to schedule an appointment. Not sure if you qualify? We’ll be happy to answer your questions.
This information is based on SBA guidance as of January 19, 2021. For additional information, review the SBA’s FAQs on How to Calculate Revenue Reduction and Maximum Loan Amounts Including What Documentation to Provide. We also recommend visiting sba.gov for additional resources and periodic updates.Back to Blog >