PPP Loans vs. Employee Retention Credit: Can You Qualify for Both?

Yes. In almost all cases a business could receive a Paycheck Protection Program (PPP) loan and also claim the Employee Retention Credit (ERC) for the same period, provided it did not use the same payroll dollars for both benefits. That was not always true. When both programs launched in 2020, the original rules forced owners to choose one or the other. The Consolidated Appropriations Act of December 2020 removed that either-or restriction retroactively, so a company that had already taken a PPP loan became free to go back and claim the ERC as well. The catch that trips people up is the anti-double-dipping rule: wages you reported to get PPP forgiveness cannot be the same wages you count toward the credit. This page walks through how each program worked, exactly how the overlap was allowed to be split, the deadlines that have since passed, the audit exposure that comes with a dual claim, and where owners turn for working capital now that neither program is still accepting applications.

The short answer, and the one rule that governs it

A business could hold both benefits at once. What it could never do is spend the same payroll dollar twice. Think of your pandemic-era wages as a single pool of money. Every dollar in that pool could be assigned to PPP forgiveness or to the ERC calculation, but not to both. This is the entire game.

Owners who understood this early tended to do well, because they could steer which wages went where. If you had more than enough payroll to cover your PPP loan, you assigned just enough wages to reach full forgiveness and freed up the remaining wages for the credit. The ERC is generally the more valuable benefit per dollar of wages, so the smart move was usually to satisfy PPP forgiveness with non-payroll costs and low-credit-value wages first, then reserve the high-value wages for the credit. That is optimization, not a loophole, and it was exactly what the law contemplated.

• Same wages, two programs: not allowed.
• Different wages, two programs: allowed, and common.
• Non-payroll costs (rent, utilities, mortgage interest) toward PPP forgiveness: encouraged, because it protects payroll for the credit.

What the Paycheck Protection Program was

The PPP was a forgivable loan delivered through banks and other lenders but backed by the Small Business Administration. Its purpose was to keep workers on payroll during 2020 and 2021 shutdowns. A borrower could receive roughly 2.5 times average monthly payroll (3.5 times for certain restaurants and hospitality businesses in the second round), then apply to have the loan forgiven if the money went to eligible costs over a covered period of 8 to 24 weeks.

Forgiveness required that at least 60 percent of the proceeds go to payroll, with the remainder available for rent, utilities, mortgage interest, and a few other categories. Money that was forgiven did not have to be repaid and was not treated as taxable income at the federal level. Anything not forgiven converted to a low-interest loan, typically at 1 percent over two to five years. The program stopped accepting applications on May 31, 2021.

What the Employee Retention Credit was

The ERC was not a loan. It was a refundable payroll tax credit, which means the government paid it out in cash even when it exceeded the taxes a business owed. A company claimed it by reporting qualified wages on its quarterly payroll tax return (Form 941) or, for periods already filed, by amending that return (Form 941-X).

To qualify for a given quarter, a business generally had to meet one of two tests: either its operations were fully or partially suspended by a government order, or it experienced a significant decline in gross receipts compared with the same quarter in 2019. The decline threshold was stricter in 2020 (a drop of more than 50 percent) and looser in 2021 (a drop of more than 20 percent), which is one reason many businesses qualified for more quarters than they expected.

The credit was also far more generous in 2021. In 2020 it was worth up to 50 percent of qualified wages capped at $10,000 of wages per employee for the year, so up to $5,000 per employee total. In 2021 it rose to 70 percent of qualified wages capped at $10,000 per employee per quarter, so up to $7,000 per quarter and as much as $21,000 per employee across the first three quarters. A business that qualified in both years could therefore see figures approaching $26,000 per employee.

The differences that actually matter

Owners often blur the two programs together because both arrived at the same time and both were meant to protect payroll. In practice they behaved very differently, and the differences drove the coordination strategy.

The most consequential difference for coordination is value density. Because the 2021 credit could reach $7,000 per employee per quarter, a dollar of qualified wages was frequently worth more inside the ERC than inside PPP forgiveness. That is why the standard advice was to protect payroll for the credit and lean on rent and utilities to close out forgiveness.

How the two were allowed to overlap without double-dipping

The mechanics live in the PPP forgiveness application. When you applied for forgiveness, you listed the payroll costs you were using to justify it. Those specific listed wages became off-limits for the credit. Any qualified wages you did not list remained available.

Here is a simplified, illustrative example. Suppose a business received a $100,000 PPP loan and paid $180,000 in qualified wages during the same window. All figures below are rounded and shown for example only.

In this example the owner used non-payroll costs to cover 40 percent of forgiveness, which freed a large block of wages for the credit. The actual credit would still be limited by the per-employee, per-quarter cap, so the illustrative $84,000 is a ceiling on the arithmetic rather than a promise. The point is structural: by choosing which costs backed forgiveness, the business kept both benefits and minimized the wages it had to surrender.

Deadlines, the IRS moratorium, and where things stand now

This is the area Lendio and most older guides skip, and it is the part that matters most in 2026. Both programs are closed to new activity.

• PPP stopped taking applications on May 31, 2021. Forgiveness for outstanding loans has largely been resolved, though borrowers whose forgiveness was denied still carry a repayable balance.
• ERC was claimed by amending payroll returns, and those amendment windows have now passed. The deadline to amend 2020 quarters fell on April 15, 2024, and the deadline for 2021 quarters fell on April 15, 2025. A business that had not filed by its applicable date can no longer start a new claim.

Between those deadlines, the IRS grew concerned about aggressive and fraudulent ERC filings pushed by promoters. In September 2023 it paused processing of new claims, tightened review, and opened voluntary disclosure and withdrawal programs for businesses that had filed questionable claims. If you filed and are still waiting, processing has been slow and heavily scrutinized. If a promoter filed on your behalf and you now doubt the claim, the withdrawal and repayment paths were designed for exactly that situation, and using them is generally far cheaper than facing an examination later.

Audit risk and the records you should keep

A dual PPP-and-ERC position is legitimate, but it is also the kind of claim the IRS looks at closely, precisely because the anti-double-dipping rule is easy to get wrong and easy to abuse. The single most common error is counting the same wages for both benefits, usually because forgiveness was already granted on wages that later showed up in an ERC calculation.

To defend a dual claim, keep a clear paper trail that ties every wage dollar to exactly one program. At a minimum, retain your PPP forgiveness application showing which payroll costs you listed, your quarterly payroll returns and any 941-X amendments, your gross-receipts figures for 2019 through 2021, and any government shutdown orders you relied on for the suspension test. If a promoter prepared your ERC claim, get their workpapers and confirm the wages they used do not overlap your forgiveness wages. Documentation, not the size of the refund, is what determines how an examination goes.

What to do now if you need capital

Because both programs have closed, owners looking for cash today are no longer choosing between PPP and ERC. They are looking at ordinary business financing, and the fastest-moving option for many is a revenue-based advance through a marketplace of funders.

These products work differently from a bank loan. Approval leans on your bank-deposit history and monthly revenue far more than on your credit score, which helps businesses whose credit took a hit during the downturn. Typical parameters look like this: a minimum around $10,000, credit scores accepted from roughly 500 and up, and funding often completed within 24 to 48 hours once documentation is in. A marketplace matches your file to multiple funders at once rather than sending you to a single lender, which tends to surface more offers. Nothing here is guaranteed, and the right structure depends on your revenue, so treat any figure as a starting point rather than a promise. The advantage over waiting on a slow tax refund is simple: the money is tied to revenue you can already show in your deposits, and it moves in days rather than months.