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SBA Funding: RRF & PPP & ERC


If your business got funds from PPP or RRF, please read on...


We've spoken with many of you this past week about maximizing funds from these programs. Here's some more tips and reminders:


PPP forgiveness only requires that 60% of the total loan be used for payroll. Don't use more than 60%: any excess can be applied to ERC credits. For example, if you received PPP2 on March 1 2021, you're not required to use payroll paid on or after that date for PPP. Run your numbers and you can preserve payroll early in the PPP covered period for ERC. Just use enough of the payroll paid during the covered period to satisfy the 60% threshold.


RRF covered period runs Feb 15 2020 through March 2023. This means that expenses previously paid can qualify for eligible RRF expenses, freeing up some of the RRF funds now and allow those funds to be used for any purpose.

To qualify for the ERC, an employer must have either suffered at least a partial shutdown via governmental order or have experienced at least a 20% decline in its receipts for the current 2021 quarter or immediately preceding quarter as compared to the same quarter of 2019.

Employers should test to see whether they had at least a 20% decline in receipts for the fourth quarter of 2020 as compared to 2019. If so, the employer can elect to take credits in the first quarter of 2021.

For all four quarters of 2021, employers should monitor and consider ways to manage their receipts if it appears that they may meet the ERC requirement of a 20% or more decline in receipts for the quarter as compared to the same quarter of 2019. Once an employer meets the test for the current quarter, it also meets the test for the immediately following quarter as well. For example: If in the last two weeks of March 2021 an employer has the opportunity to defer receipts until the first week of April and thus meet the necessary 20% or more decline in gross receipts threshold for the first quarter, doing so would entitle the employer to claim the ERC for the first and second quarters of 2021.

Employers who received first and second draw Paycheck Protection Program (PPP) loans cannot use the same wages which qualified for PPP loan forgiveness to also generate credits. However, the law provides that wages are first applied toward the ERC unless the employer elects to use them toward PPP loan forgiveness instead. Consider an example of an employer who receives a second draw PPP loan in March 2021 and who qualifies for the ERC for the first quarter of 2021. Wages paid between January 1, 2021, up to the day before the PPP loan funding date, will qualify for the ERC. For wages paid on and after the PPP loan funding date and during the PPP loan covered period, wages may either be counted toward PPP loan forgiveness or the ERC. The employer may consider dedicating some wages paid in March 2021 toward the ERC to maximize the credits and then dedicating the remaining wages toward PPP forgiveness. This would be especially true if the employer will not qualify for the ERC in the second quarter of 2021. If the employer is paying significant amounts of rent, mortgage interest, supplier costs and other allowable expenses under the PPP program, it may dedicate more wages and health insurance premiums toward the ERC while keeping in mind the 60% payroll cost requirement of the PPP loan program.

Hope this helps. If you have questions, or need help running these calculations, let us know.

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