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ARTICLE · 26 JANUARY 2021

The SBA's Paycheck Protection Program—Revenue Reduction Calculations Guidance Released

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On January 19, 2021 the Small Business Administration (SBA) issued frequently asked questions that address how to calculate revenue reduction and maximum loan amounts

United StatesTax
A&O Shearman
A&O Shearman
Daniel Mitz
Daniel Mitz
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On January 19, 2021 the Small Business Administration (SBA) issued frequently asked questions that address how to calculate revenue reduction and maximum loan amounts for second-draw Paycheck Protection Program (PPP) loans.

Revenue Reduction Calculation

To be eligible for a second-draw PPP loan, a business must have experienced a 25 percent reduction in gross receipts during one quarter in 2020 (not all, just one of them) compared with the same quarter in 2019. For a for-profit business, the SBA defines "gross receipts" as generally all revenue in whatever form received or accrued (in accordance with the entity's accounting method, i.e., accrual or cash) 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, as these terms are used and reported on IRS tax return forms. Gross receipts do not include (i) taxes

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