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Common questions about completing a Second Draw PPP loan application within QuickBooks Capital

Important: This article is intended to help borrowers applying for a second draw PPP loan using the QuickBooks Capital Online Second Draw Loan Application Experience. It supplements information contained in the QuickBooks application experience and is not a comprehensive list of eligibility or other requirements for second draw PPP loans using QuickBooks Capital’s application. For more information on second draw PPP loan program rules, please refer to SBA and Treasury guidance, including the Consolidated IFR and Second Draw Loan IFR.

Get answers to questions about completing a Second Draw Paycheck Protection Program (PPP) loan application within QuickBooks Capital. 

Need more information to complete your Second Draw PPP loan application through QuickBooks Capital? We’re here to help. In this article we’ll provide answers to some common questions.

How does the payroll expense period I choose in the QuickBooks Capital Second Draw Loan Application affect my loan amount?

For a Second Draw PPP loan, the maximum loan amount you can receive is 2.5 times your average monthly payroll expenses or $2 million, whichever is less. Some borrowers in the restaurant or accommodations industries (those with a NAICS code that starts with 72) may be eligible to use a multiplier of 3.5.

QuickBooks Capital is able to help borrowers who want to use a calendar year 2019 or calendar year 2020 lookback period. You can choose one of these two time periods in the QuickBooks Capital application. 

You can select the period that results in the higher loan amount for your business. For example, if your average monthly payroll expenses were higher in 2019 than they were in 2020, selecting the calendar year 2019 may make your business eligible for a higher loan amount.

Note: The loan amount available through QuickBooks Capital may be lower than the amount for which you’re qualified.  For example, all borrowers are eligible to use the precise 1-year period before the date on which the loan is made. In addition, seasonal applicants and new entities are eligible to use lookback periods tailored to their situation. These additional lookback periods could result in a higher loan amount. QuickBooks Capital is only able to assist borrowers using payroll data processed through QuickBooks Payroll and with loans of up to $150,000.

How does the past revenue of my business affect my eligibility for a Second Draw PPP loan?

To qualify for a Second Draw PPP loan, your business must have had a reduction in gross receipts in excess of 25% over two comparable time periods. 

For example, suppose your business had gross receipts of $50,000 in the second quarter of 2019 and gross receipts of $30,000 in the second quarter of 2020. That would be a reduction of 40% between these two quarters, and you would be eligible for a Second Draw PPP loan (assuming all other eligibility criteria are met).

You can show a qualifying reduction in gross receipts in excess of 25% in one of these ways:

  • You can compare your gross receipts for one quarter in 2020 with gross receipts for the corresponding quarter in 2019.
  • If your business was in operation in all four quarters of 2019, you can also compare your annual gross receipts for 2020 with your annual gross receipts for 2019.
  • If you were not in business during the first or second quarter of 2019 but were in business during the third and fourth quarters of 2019,  you can compare your gross during any quarter of 2020 with gross receipts for the third or fourth quarter of 2019.
  • If you were not in business during the first, second, or third quarter of 2019 but were in business in the fourth quarter of 2019, you can compare your gross receipts of any quarter of 2020 with gross receipts for the fourth quarter of 2019.
  • If you were not in business at all in 2019, but were in operation before February 15, 2020, you can compare the gross receipts from the second, third, or fourth quarter of 2020 with the first quarter of 2020.

What are gross receipts?

Gross receipts include “all revenue in whatever form received or accrued (in accordance with the entity’s accounting method) from whatever source, including from the sales of products or services, interest, dividends, rents, royalties, fees or commissions, reduced by returns or allowances.” 

Generally, gross receipts are “total income” (or “gross income” for sole proprietors, independent contractors, or self-employed individuals) plus “cost of goods sold,” excluding net capital gains or losses as these terms are defined and reported on IRS tax forms.

Gross receipts do not include the following:

  • 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 and excluding taxes levied on the concern or its employees)
  • Proceeds from transactions between a concern and its domestic or foreign affiliates
  • Amounts collected for another by a travel agent, real estate agent, advertising agent, conference management service provider, freight forwarder or customs broker

All other costs, such as subcontractor costs, reimbursements for purchases a contractor makes at a customer’s request, investment income, and employee-based costs such as payroll taxes, may not be excluded from gross receipts.

For an eligible nonprofit organization, a veterans organization, an eligible nonprofit news organization, eligible 501(c) organization, or eligible destination marketing organization, gross receipts has the meaning in section 6033 of the Internal Revenue Code of 1986. The SBA has detailed rules for gross receipts for affiliates. See Part IV(c)(2)(ii) on page 3718 of the Second Draw Loan IFR for these details.

Note: If you got a First Draw PPP loan and received loan forgiveness, do not include the forgiven amount in your gross receipts.

Do I need to provide documentation showing the reduction in gross receipts in excess of 25% with my application?

An authorized representative of your business must certify that the business has realized a reduction in gross receipts in excess of 25% over two comparable time periods. If you’re applying for a loan amount less than or equal to $150,000, you don’t need to provide supporting documentation when you apply for the loan. 

However, you must maintain and provide documentation sufficient to establish this reduction on or before the date you apply for loan forgiveness, or any time at SBA’s request if you do not apply for forgiveness. Such documentation may include relevant tax forms, including annual tax forms, or, if relevant tax forms are not available, a copy of the applicant’s quarterly income statements or bank statements.  If you calculated your revenue reduction based on comparing annual gross receipts in 2020 with 2019 (and were eligible to do so), you must provide copies of your annual tax forms substantiating the revenue decline.

Regulations and guidance from the SBA and the U.S. Department of Treasury on the PPP are evolving rapidly. Please refer to the PPP Second Draw Borrower Application and to the latest guidance from SBA and Treasury to confirm the most current program rules and how they apply to your particular situation.

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