Distinguishing Factors Between ERC and PPP Loans

ERC and PPP loans
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In the United States, 34% of small businesses closed from 2020 due to the COVID-19 pandemic.

With the loss of many businesses during the pandemic, the United States government issued the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which established the provisions for the Paycheck Protection Program (PPP) and Employee Retention Credit (ERC).

The information below will provide an outline of what ERC and PPP loans are, describing several factors that distinguish the difference between ERC and PPP loans. Keep reading to learn more. 

What Is the Payment Protection Program (PPP)?

PPP, established in March 2020, and designed by the Small Business Administration (SBA), acts as an incentive for small businesses to keep their workers employed, during the beginning of the COVID-19 pandemic.

The legislation allows businesses to take out a second loan or “second draw’ in addition to the first loan.

Qualifications for the second draw are as follows:

  • Previously received the first PPP loan.
  • No more than 300 employees.
  • Can prove at least a 25% reduction in gross receipts between quarters in 2019 and 2020.

PPP Loans Can Be Used For:

  • Mortgage, rent, and lease payments
  • Utilities
  • Operations expenditures
  • Property damage costs due to public disturbances not covered by insurance
  • Worker protection expenditures to be COVID-19 compliant

What Is the Employee Retention Credit (ERC)?

ERC, established in March 2020, under the CARES Act, supports businesses that COVID-19 affected through a refundable tax credit initiative in an attempt to keep their employees on the payroll.

Employers may claim credit immediately by reducing the taxes sent to the IRS. Even if the credits happen to exceed the payroll taxes, this allows employers to request a refund.

ERC loans are accessible to employers, where they can get immediate access to the credit by reducing employment tax deposits.

Qualifications for ERC are as follows:

  • Full or partial suspension of business/operation due to COVID-19 related actions.
  • Experienced a decline in gross receipts during the calendar quarter of 2020.

ERC Can Be Used For:

  • Qualified wages
  • Health insurance costs PPP and ERC

Although the Payment Protection Program and the Employee Retention Credit are both forms of COVID-19 relief aid, there are several differences that distinguish one from the other.

The Difference Between ERC and PPP Loans

There are various differences between PPP and ERC. Let’s take a look at the following:


  • This form of aid is a tax credit.
  • The payments are processed through the IRS.
  • Employers do not have to pay back the credit.


  • This form of aid is a forgivable loan.
  • The payments are processed through banks and through the Small Business Administration (SBA).
  • Employers do not have to pay back the loans (unless there is an amount that was taken out and not used).

Differences of Eligibility of ERC and PPP

As you can see below, both the PPP and ERC allow for any type of business or employer to apply for aid. Consider the following differences of eligibility:


  • All small businesses with 300 employees or less.
  • The business must show that it experienced a 25% decrease in any quarter’s gross receipts from 2019 to 2020.


  • All employers, except those who are self-employed.
  • The business must show that it experienced a decrease in gross receipts by more than 20% in any quarter of 2020 compared to the same quarter in 2019.
  • The ERC applies to wages paid after March 12, 2020 and before January 1, 2021.

Difference of Benefits of ERC and PPP:

Each form of aid works towards uplifting the employees by focusing on wage stability and payroll fluidity. Let’s take a look at PPP and ERC


  • For each employee, wages up to $10,000 can be counted to determine the amount of the 50% credit of their qualified wages.
  • The payment, often in the form of a cash payment from the IRS, may work towards offsetting payroll tax payments in the future.


  • Second Draw PPP loan is 3.5x the average monthly 2019 or 2020 payroll costs up to $2 million.

Can You Claim Both PPP and ERC? Yes, You Can!

With the understanding that PPP and ERC are two different types of aid, with different qualifications and uses; business owners should be aware that they can use both.

Per the Taxpayer Certainty and Tax relief Act (2020), it’s allowed that an employer eligible for ERC can claim that ERC even if they have already received a loan from PPP.

The Consolidated Appropriations Act, 2021 allows for employers to take advantage of both monetary aids as well. It offers increased credit rates and an increased limit on individual employee qualified wages.

In fact, according to ERC Today, “the IRS will accept these for up to three years after the initial filing, so the ability to take part in the ERC program may continue into the end of 2024.”

Why ERC Today?

ERC Today is a flexible company that assists businesses with determining whether employers are able to apply for and use ERC in addition to PPP and assists with amending qualifying businesses’ Quarterly Form(s) 941.

With their dedicated client support, ERC Today makes it easy and assists valued clients with questions, concerns, and payments related to ERC while offering tax consulting and filing options as well.

Did You Apply For ERC?

Now that you know the difference between PPP and ERC, it’s not too late to apply for ERC!

COVID-19 devastated thousands of businesses across the United States. If you were not inflicted, it is likely you may know someone who was. The Employee Retention Credit (ERC) is a chance to receive the aid business owners deserve.

Will you take this opportunity and get your COVID-19 relief for your business?

If you have an interest in taking advantage of or learning more about the Employee Retention Credit (ERC) for COVID-19 relief, you can contact ERC Today for more information.

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