Business Finance

PPP Loans vs. Employee Retention Credit – Can you Qualify for Both in 2023?

Sep 01, 2023 • 9 min read
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      The Paycheck Protection Program (PPP) and Employee Retention Credit (ERC) were created to help businesses stay afloat during COVID-19. If the pandemic has had a negative impact on your small business, you might wonder whether you can take advantage of both of these programs. Keep reading to find out.

      Key Points:

      • The PPP was a forgivable loan. The ERC is a refundable tax credit.
      • The PPP loan program is no longer available. The ERC can still be claimed retroactively.
      • Businesses that received a PPP loan can still apply for the ERC.
      • Employee wages used to receive PPP loan forgiveness cannot be used in your ERC claim.

      What Is the Paycheck Protection Program?

      Established by the CARES Act and administered by the U.S. Small Business Administration (SBA), the PPP offered loans of up to $10 million to small businesses that faced financial hardship as a result of COVID-19. 

      As long as you qualified, you could have received a loan for up to 2.5 times of your average monthly payroll costs. The loan can be forgiven completely if you file a forgiveness application and show you used the proceeds to cover rent, utilities, payroll costs, and other qualifying expenses.

      what is the employee retention credit

      What is the Employee Retention Credit?

      The ERC is a refundable payroll tax credit for qualified wages paid to employees in 2020 and 2021. It was created under the CARES Act and administered by the Internal Revenue Service (IRS) to encourage businesses to retain their employees during the pandemic. 

      You may qualify if you experienced partial shutdowns due to government orders or significant declines in quarterly gross receipts due to COVID-19. If you meet certain eligibility criteria, you can claim as much as $5,000 per employee in 2020 and as much as $21,000 per employee in 2021.

      Differences Between PPP and ERC

      While the PPP and ERC were both designed to support businesses that have struggled financially as a result of the pandemic, there are several noteworthy differences between these two programs.

      Type of fundingForgivable loanTax credit
      Funding time10 days3-6 months
      CostAny funds you didn’t receive forgiveness forNone
      Amount2.5x the average monthly payroll costsUp to $26,000 per W-2 employee
      Still availableNoYes

      Type of Funding

      The PPP offers a forgivable loan. If you used the funds on payroll, rent, and other qualifying expenses, you wouldn’t have to pay it back. In the event you used part of the loan for non-qualifying reasons, that portion won’t be forgiven. You’ll have to repay it with a fixed interest rate of 1% over a period of either two or five years. The ERC, on the other hand, is a tax credit you won’t have to repay.

      Funding Time

      If you qualified for the PPP loan, you would have received the funds via direct deposit, usually within ten days of approval. The ERC, however, will be distributed to you after you file Form 941-X and the IRS has reviewed your claim. The IRS will process the credit you’re owed and send you a check. The IRS can take anywhere from 3-6 months+ to process your credit. We highly recommend reserving your place in line now by filing the necessary paperwork with the IRS.


      It was free to apply for the PPP loan. You would only incur a cost if you don’t use the loan proceeds on qualifying expenses and must pay it back. There’s no governmental fee to receive the ERC either. It’s a tax credit that you can receive by filing an amended payroll tax form for each of the tax periods that you qualify for. The only expense you may face will be service charges if you ask an accountant or tax professional to assist in preparing and filing your tax forms.


      The eligibility requirements for the ERC were updated in 2021. 

      2020 qualifications:

      • Qualifying wages of up to 100 full-time employees
      • A decrease in gross revenue of at least 50% compared to the corresponding quarter in 2019
      • Or either a full or partial suspension of business operations created by a government mandate 

      2021 qualifications:

      • Qualifying wages of up to 500 full-time employees
      • A decrease in gross revenue of at least 20% compared to the corresponding quarter in 2019
      • Or either a full or partial suspension of business operations created by a government mandate

      PPP loan requirements included:

      • A small business with 500 employees or less
      • The business was operational before February 15, 2020
      • For second-draw loans, the business must have used up previous loan funds and demonstrate a 25% or more reduction in gross revenue.

      Can You Get Employee Retention Credit and PPP?

      Initially, a business that received a PPP loan was not eligible for the ERC. Thanks to the Consolidated Appropriations Act of 2021, however, a business that received a PPP loan may also apply for the ERC retroactively back to 2020. 

      The caveat, however, is that you can’t use the wages that qualify you for PPP loan forgiveness to determine your ERC amount. You’ll need documentation that proves you’re not “double dipping” and using both programs to cover the same wages. 

      Let’s say you used your PPP funds to pay for $50,000 in wages and you expect to qualify for forgiveness. In this scenario, you can’t use those wages that have been forgiven to calculate your ERC.

      How to Apply for PPP and ERC

      You can no longer apply for a PPP loan, but you can still fill out an application for the ERC. If you’d like to claim the ERC, you can do so on Form 941-X. Don’t hesitate to consult a tax professional for assistance.

      How to apply for the employee retention credit

      How to Maximize the PPP and ERC

      There are a few ways you can maximize the benefits of both the PPP and ERC, including: 

      • If you included non-payroll costs in your PPP loan forgiveness application, show you used a minimum of 60% of the total loan on payroll. This way you’ll be eligible for full forgiveness. 
      • In the event you don’t list qualifying non-payroll costs on your application, you must prove that you used 100% of the loan amount on payroll to get your loan completely forgiven.
      • Provide detailed explanations to help the tax professional you work with understand exactly how the government orders impacted your business. This will help them maximize the amount you qualify for.
      • Don’t forget to separate the total payroll costs you used for the PPP loan from the total payroll costs you list with the ERC. This can help you avoid getting denied for using the same payroll costs for both programs.
      • Use a tax professional vs. filing yourself. Though you may pay money, these professionals often understand the program much better than you ever could on your own. As a result, they often can help you qualify for more money than you would on your own. They also will help ensure that you file the credit correctly so that in the event of an audit all of your i’s are dotted and t’s are crossed.

      Reap the Benefits of the PPP and ERC

      If you previously applied for PPP, there’s no reason not to apply for the ERC. By doing so, you can mitigate the financial losses you may have incurred during the pandemic and set your business up for future success. 

      About the author
      Anna Baluch

      Anna Baluch is a freelance personal finance writer from Cleveland, Ohio. You can find her work on sites like The Balance, Freedom Debt Relief, LendingTree and RateGenius. Anna has an MBA in marketing from Roosevelt University.

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