How to Calculate 25% Revenue Reduction for PPP 2nd Draw Loans

How do I know if I met the 25% gross revenue decline rule?

“Gross revenue” means any and all revenue received from the sale of products or services.  The measurement period is based on a calendar quarter (January-March, April-June, July-September, October-December).  Your business must show that the calendar quarter in 2020 had 25% less gross revenue than that same quarter in 2019.  For example, if your sales were $100,000 in Q2 2019 and sales were $75,000 in Q2 2020, your business would meet the criteria.

If your annual revenue for 2020 is 25% lower than 2019, you can also use the entire year as the time-period in lieu of a specific quarter.

Entities not in business during the 1st and 2nd quarters of 2019 can compare any quarter in 2020 to the 3rd or 4th quarter of 2019.  Entities that were only in business during the 4th quarter of 2019 can compare any quarter in 2020 to the 4th quarter of 2019.  If you were not in business during 2019 but were in operation on February 15th, 2020 you must demonstrate that revenues in the 2nd, 3rd or 4th quarters of 2020 were 25% less than the 1st quarter of 2020.

What type of documentation is needed to support this?

You can use any of the following:

  1. Quarterly profit & loss statements – this can be self-prepared using QuickBooks or any other accounting software; or it can be accountant-prepared.
  2. Bank Statements – show deposits from the relevant quarters to demonstrate revenue.
  3. Annual Tax Returns / Annual profit & loss statement – use this if the entire year was 25% less than 2019 and you’ve completed your 2020 tax returns OR have 2020 profit & loss statements available.

When do I need to provide the documentation?

Loans greater than $150,000 must provide this documentation when they apply for their 2nd PPP loan.

Loans of $150,000 or less do not need to provide the documentation at the time they apply, however they must provide documentation when the borrower seeks loan forgiveness.

Ready to Apply for PPP Rd 2?

Jacob Reiter

Jacob has been leading GCB’s PPP lending program, working with business owners and entrepreneurs to secure funding to keep their businesses functioning during the pandemic. Questions about PPP Funding?

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