The U.S. Small Business Administration (SBA) and Treasury issued an 18-page document today Tuesday, January 19th, 2021 detailing how Paycheck Protection Program (PPP) borrowers should calculate revenue reduction and maximum loan amounts for second-draw PPP loans. The guidance also lists the documents borrowers must provide to support each set of calculations.
The second-draw calculations guidance is presented in the form of 24 Questions and answers that address a various situations involving different types of entities.
The guidance answers a frequently asked question regarding the relationship between calculating gross receipts and the accounting method the borrower uses for its business.
Other topics discussed include (among others)
- Documents required to prove a 25% reduction in gross revenues.
- How to calculate gross revenue reduction if using yearly tax returns.
- How self-employed PPP borrowers, both those with and those without employees, should calculate the maximum loan amount for their PPP second-draw.
- How S corporations and C corporations should calculate their maximum second-draw PPP loan amount.
The guidance also covers first-draw calculations and documents requirements.
Business owners and their accountants should peruse this important 18-page document in order to avoid complications with PPP loan applications.