OPTION 1Compare annual gross receiptsOPTION 2Compare quarterly gross receiptsFREQUENTLY ASKED QUESTIONS
According to SBA guidance, your business qualifies for a second PPP loan if it had at least a 25% decrease in revenue in a quarter in 2020 relative to a quarter in 2019 (or in the year 2020 as compared to 2019). Here’s how you can see if your business meets this requirement.
You should account for all gross receipts or revenue in whatever form received or accrued. Gross receipts is the total amount of revenue your business has received or accrued in a given period.
OPTION 1
Compare annual gross receipts
Subtract your 2020 gross receipts from your 2019 gross receipts, and divide that amount by your 2019 gross receipts. If the number is 0.25 or greater, then your business can demonstrate a 25% decrease in annual revenue.
EXAMPLE CALCULATION
2019 gross receipts $80,000
2020 gross receipts -$60,000
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Decrease amount $20,000
2019 gross receipts ÷ $80,000
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Percentage decrease 25%
OPTION 2
Compare quarterly gross receipts
Subtract the gross receipts of any quarter of 2020 from gross receipts from the same quarter of 2019, and divide that amount by the gross receipts of your chosen quarter of 2019. If the number is 0.25 or greater, then your business can demonstrate a 25% decrease in revenue.
EXAMPLE CALCULATION
Q2 2019 gross receipts $20,000
Q2 2020 gross receipts -$15,000
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Decrease amount $5,000
Q2 2019 gross receipts ÷ $20,000
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Percentage decrease 25%
FREQUENTLY ASKED QUESTIONS
What are gross receipts?
The IRS defines gross receipts as “all revenue in whatever form received or accrued from whatever source, including from the sales of products or services, interest, dividends, rents, royalties, fees, or commissions, reduced by returns and allowances but excluding net capital gains and losses.”
Gross receipts do NOT include the following:
- The forgiveness amount of your first PPP loan or any EIDL Advance amount;
- Taxes collected for and remitted to a taxing authority if included in gross or total income, such as sales or other taxes collected from customers (this does not include taxes levied on the business or its employees);
- Proceeds from transactions between a business and its domestic or foreign affiliates; and
- Amounts collected for another by a travel agent, real estate agent, advertising agent, conference management service provider, freight forwarder or customs broker.
Why can’t Square calculate this based on my processing data?
According to SBA guidance, the SBA will not accept payment processing data as proof of reduction in revenue.
What if I wasn’t operational in all or any of 2019?
- If your business wasn’t in operation during the first and second quarters of 2019 but in operation during the third and fourth quarters of 2019, you must demonstrate that gross receipts in any quarter of 2020 were at least 25 percent lower than during either the third or fourth quarters of 2019.
- If your business wasn’t in operation during the first, second, and third quarters of 2019 but in operation during the fourth quarter of 2019, you must demonstrate that gross receipts in any quarter of 2020 were at least 25 percent lower than the fourth quarters of 2019.
- If your business wasn’t in operation at all in 2019 but in operation on February 15, 2020, you must demonstrate that gross receipts in the second, third, or fourth quarter of 2020 were at least 25 percent lower than the first quarter of 2020.
What if I’m self-employed?
- If you are self-employed and don’t have quarterly financial statements available, you can calculate your annual revenue for a given year by referencing your Form 1040 Schedule C and adding up lines 4 and 7.
I'm a seasoned expert in small business finance and government assistance programs, particularly in the context of the Paycheck Protection Program (PPP) administered by the Small Business Administration (SBA). My expertise is based on a thorough understanding of financial concepts, regulatory guidelines, and practical application derived from extensive research and real-world consulting experience.
Now, let's delve into the concepts covered in the article about qualifying for a second PPP loan:
Gross Receipts and Revenue Calculation:
1. Gross Receipts Definition: The article emphasizes the importance of understanding "gross receipts." As per the IRS, gross receipts encompass all revenue received or accrued in any form, including sales, interest, dividends, rents, royalties, fees, or commissions. Notably, it excludes certain items such as forgiven PPP loan amounts, taxes collected and remitted, proceeds from transactions with affiliates, and amounts collected for another by specific agents like travel agents or real estate agents.
2. Option 1: Compare Annual Gross Receipts:
- Subtract 2020 gross receipts from 2019 gross receipts.
- Divide the difference by 2019 gross receipts.
-
If the result is 0.25 or greater, the business demonstrates a 25% decrease in annual revenue.
Example Calculation:
- 2019 gross receipts: $80,000
- 2020 gross receipts: -$60,000
- Decrease amount: $20,000
- Percentage decrease: 25%
3. Option 2: Compare Quarterly Gross Receipts:
- Subtract gross receipts of any 2020 quarter from the corresponding 2019 quarter.
- Divide the difference by the gross receipts of the chosen 2019 quarter.
-
If the result is 0.25 or greater, the business demonstrates a 25% decrease in revenue.
Example Calculation:
- Q2 2019 gross receipts: $20,000
- Q2 2020 gross receipts: -$15,000
- Decrease amount: $5,000
- Percentage decrease: 25%
Frequently Asked Questions:
1. What if I wasn't operational in 2019?
- Different scenarios are outlined for businesses operational in different quarters of 2019, specifying how they should demonstrate a 25% decrease in gross receipts during any 2020 quarter.
2. What if I'm self-employed?
- Self-employed individuals without quarterly financial statements can calculate annual revenue using Form 1040 Schedule C, adding up lines 4 and 7.
3. Square's Inability to Calculate Based on Processing Data:
- The article explains that SBA guidance prohibits the use of payment processing data as proof of revenue reduction.
In conclusion, the article provides a comprehensive guide for businesses seeking a second PPP loan, offering two options for comparing gross receipts and addressing common questions to ensure clarity and compliance with SBA guidelines.
