Now is time to think about optimization of the PPP and ERC in 2021. You will first want to make sure you qualify for PPP 2.0. We are finding a lot of breweries do not have a qualifying quarter with revenues down by 25%, so this might end up being moot, but if you do, then we need to decide if it makes sense to take the PPP 2.0 (it may not in some circumstances) and if so how do we optimize usage between the PPP 2.0 and ERC in 2021.
The first potential strategy here is to roll the dice and hope the PPP 2.0 funds will still be around come March/April. In this strategy, the plan would be to do the ERC for Q1 and Q2, apply for the PPP 2.0 so you get it starting in April and then elect the 24 week covered period and start using the PPP 2.0 funds in July (after the ERC expires). This allows you to maximize the usage of both, however, you risk trying this and PPP 2.0 runs out of money before you are able to get it, which would result in no PPP funds.
The second potential strategy is to use both the PPP and ERC during Q1 and Q2 with a scenario being you do the ERC for January and February, do PPP for March and April and then go back to ERC for May and June. This works especially well when your employee make at least $60,000 per year as they would only need two months of pay each quarter to meet the wage threshold for the ERC.
However, I imagine that most breweries and small businesses have average salaries that are less than $60,000 per employee which means we will have a potential trade-off situation where we would be using the PPP for a period of time and that would not allow us to fully maximize the ERC. This then brings up the question on whether the opportunity cost of forgoing the ERC for the PPP makes sense. If there is a concern that it will take a while to use up the PPP funds (at least over two months of time), then it may make sense to not do the PPP and just do the ERC for the two quarters.
We put together a spreadsheet you can use to help determine if you qualify for both the PPP and ERC and if so, does it make sense to do the PPP depending on how long it takes you to use up the PPP funds. Please see the link below for this spreadsheet tool you can use.
Note that if you want to do the ERC during any point in time during 2021, please notify your payroll company as soon as possible so you can start benefiting right away from the payroll tax credits and refunds you will receive.
If you have any questions on these two programs, please feel free to reach out to me at firstname.lastname@example.org