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The Consolidated Appropriations Act has major initiatives in it that affect small businesses all over the country. The act created another Paycheck Protection Program for small business interruption loans, and it contained legislation that made PPP loans tax-deductible. Or as one of my clients put it “this was really free money?” Yes. Yes, it was.

The Act also amended the infamous CARES Act on Employee Retention Credits. If you missed these Employee Retention Credits (ERC), you can read our article that has a detailed breakdown under the CARES Act and what was changed by the Consolidated Appropriations Act. Our ERC chart provides an overall summary.

Would ERC or PPP loan be better for my business?

When consulting with my clients after the CARES Act this past spring and summer, choosing the PPP loan over the Employee Retention Credits (ERCs) seemed like the clear option. Quite simply, there were larger dollars available under the PPP loan than the Employee Retention Credit program. But then came the regulators, Congress, the SBA, the Dept of Treasury, banks, and attorneys all had to give clarification, provide guidance, and change the rules in the middle of the game.

Suddenly a simple two-page PPP loan application form turned into a very complicated, over-analyzed, application form with very serious consequences for what could be deemed as a mistake. Then the SBA decided to make the entire program public. Now anyone can see which business received the loans and how much was received. Plus, many of these businesses’ loan details will be open for government audit for a significant period. Just last week, the SBA issued 82-page and a 42-page IFRs (interim final rules) on PPP.

Now under the Consolidated Appropriations Act, we have the wisdom of hindsight when choosing between PPP and the Employee Retention Credits. Technically, small businesses can choose both, but the PPP loan will significantly hinder the ability to capture significant ERCs for 2021.

Side-by-side comparison of ERC vs. PPP loan

  Employee Retention Credit
(for 2021)
PPP Loan
Public Information Reported on confidential payroll reports PPP Loan information is publicly viewable
Application Necessity No borrower application. No forgiveness application. Multiple applications required. Bank and SBA approval are required for loan reciept and forgiveness receipt.
Benefit Amount Maximum $7,000 per employee per quarter for all four quarters 2.5 Months of payroll
Employer Size Available to all employer sizes Only available for employers with less than 300 employees
Revenue Test 20% gross receipt reduction 2021 vs 2019 25% quarterly gross receipt reduction 2020 vs 2019
Funds Restriction None Must use on qualified expenses
Limits on Highly Compensated None Limited to 100,000 annuallized wage
Benefits for Owner’s Compensation Not available for owner’s payroll Available for owner’s payroll
Calvetti Ferguson’s Involvement Calvetti Ferguson will determine your qualification, quantify your credit, and filed your amended or original payroll reports. Owners/CFOs/Controllers/Attorneys are responsible for working with the bank and signing off on PPP forms. Calvetti Ferguson will consult or prepare applications on an as needed basis
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