Paycheck protection program (PPP)
Application & Forgiveness: (100% forgivable loan)
About PPP and how to apply
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PPP Forgiveness
NOTE: This page is to assist with preparation of the SBA's PPP loan forgiveness application based on latest requirements set as of June 5, 2020. However, if you are a borrower getting prepared to submit an application, it should be noted that a request has been sent to Congress - on behalf of lenders - to consider automatic forgiveness of loan amounts under $150,000. Therefore, if your business loan amount is lower than this threshold, submission of the loan forgiveness application may be worth delaying until a decision is made.
Summary of major changes to original SBA guidance on forgiveness
- Portion of PPP loan proceeds that must be used for payroll costs was reduced from 75% to 60%, up to 40% on non-payroll costs
- Loans issued prior to June 5, 2020 have a maturity of 2 years; Loans issued after June 5, 2020 have a maturity of 5 years.
- Borrowers that received PPP loans before June 5, 2020 to elect to use the original 8-week or a 24-week covered period; for all other borrowers, the covered period is 24 weeks.
- For businesses electing to use 24-week covered period, cap on payroll compensation for owner-employees and self-employed individuals is $20,833; for 8-week period, $15,385 is the cap
- A non-payroll cost is eligible for forgiveness if it was i. paid during the covered period or ii. incurred during the covered period and paid on or before the next regular billing date, even if the billing date is after the covered period.
- If FTE reduction occurred, adjustment in loan forgiveness not reduced if FTE reduction eliminated by December 31, 2020 instead of June 30, 2020 (i.e. re-hiring happened or was offered); also known as Safe Harbor FTE reduction.
A borrower may submit a loan forgiveness application any time on or before the maturity date of the loan including before the end of the covered period if the borrower has used all of the loan proceeds for which the borrower is requesting forgiveness
Note: If in doubt, recommend completing application process after the Covered Period
Deferral of loan principal and interest is at least 6 months from loan disbursement date (confirm with lender date when deferral period ends)
Note: Spanish versions on SBA website
- EIDL loan amount to be deducted from PPP loan amount forgiven
- Maximum loan forgiveness amount is lesser of:
- PPP loan amount
- Loan amount assuming 60% spent on payroll cost (e.g. if spent $50,000 on payroll cost, max loan amount would be $50,000/60% = $83,333)
- FTE adjusted costs (i.e. reduced payroll and non-payroll costs can get credit for if number of FTEs or hourly workers reduced)
- Portion of loan may not be forgiven if number of employees or hours for non-salaried workers not restored by end of 2020; however exemptions exist, e.g.: If you were unable to operate between February 15, 2020, and the end of the Covered Period at the same level of business activity as before February 15, 2020 due to compliance with public health regulations issued between March 1, 2020 and December 31, 2020.
- Need to keep payroll costs of employees and owners separated, credit for non-cash compensation payroll costs will not apply for owners, e.g. health insurance.
- You will need to submit and maintain key documents to support calculations in loan forgiveness application (to refine).
- Verification of the eligible cash compensation and non-cash benefit payments and/or incurred costs related o these payments.
- Verification of number of FTEs and number of hours paid for hourly workers.
- Verification of non-payroll expenses paid or incurred.
Documentation to be submitted with the forgiveness application as it relates to the Covered Period
- Payroll related documentation
Documentation verifying the eligible cash compensation and non-cash benefit payments
- Bank account statements or third-party payroll service provider reports
- Tax forms or equivalent third-party payroll service provider reports for (1) Payroll tax filings reported, or that will be reported and (2) State quarterly business and individual employee wage reporting and unemployment insurance tax filings reported,
- or that will be reported
Payment receipts, cancelled checks, or account statements documenting the amount of any employer contributions to employee health insurance and retirement plans that the Borrower included in the forgiveness amount
- FTE related documentation
Documentation showing (at the election of the Borrower)
- The average number of FTE for the lookback period selected:
- (1) average number of FTE employees on payroll per month employed by the Borrower between February 15, 2019 and June 30, 2019 or
- (2) the average number of FTE employees on payroll per month employed by the Borrower between January 1, 2020 and February 29, 2020
- In the case of seasonal employers - the average number of FTE employees on payroll per month employed by the Borrower between February 15, 2019 and June 30, 2019; between January 1, 2020 and February 29, 2020; or any consecutive twelve week period between May 1, 2019 and September 15, 2019
This documentation can include payroll tax filings reported, or that will be reported to the IRS (typically, Form 941) and state quarterly business and individual employee wage reporting and unemployment insurance tax filings reported, or that will be reported to the relevant state. Documents submitted may cover periods longer than the specific time period.
- Nonpayroll related documentation
Documentation verifying existence of eligible payments from the Covered Period.
- For Business mortgage interest payments: Copy of lender amortization schedule and receipts or cancelled checks verifying eligible payments from the Covered Period; or lender account statements from February 2020 and the months of the Covered Period through one month after the end of the Covered Period verifying interest amounts and eligible payments.
- For Business rent or lease payments: Copy of current lease agreement and receipts or cancelled checks verifying eligible payments from the Covered Period; or lessor account statements from February 2020 and from the Covered Period through one month after the end of the Covered Period verifying eligible payments.
- For Business utility payments: Copy of invoices from February 2020 and those paid during the Covered Period and receipts, cancelled checks, or account statements verifying those eligible payments.
Documentation to be maintained (not required to be submitted) as it relates to the Covered Period
- Documentation supporting the listing of each individual employee in PPP Schedule A Worksheet Table 1 (see application), including the Salary/Hourly Wage Reduction calculation, if necessary.
- Documentation supporting the listing of each individual employee in PPP Schedule A Worksheet Table 2 (see application); specifically, that each listed employee received during any single pay period in 2019 compensation at an annualized rate of more than $100,000.
- Documentation regarding any employee job offers and refusals, firings for cause, voluntary resignations, and written requests by any employee for reductions in work schedule.
- Documentation supporting the PPP Schedule A Worksheet "FTE Reduction Safe Harbor."
- All records relating to the Borrower s PPP loan, including documentation submitted with its PPP loan application, documentation supporting the Borrower s certifications as to the necessity of the loan request and its eligibility for a PPP loan, documentation necessary to support the Borrower s loan forgiveness application, and documentation demonstrating the Borrower s material compliance with PPP requirements. The Borrower must retain all such documentation in its files for six years after the date the loan is forgiven or repaid in full, and permit authorized representatives of SBA, including representatives of its Office of Inspector General, to access such files upon request.
- Payroll costs paid and payroll costs incurred during the 24-week or 8-week period
- For each owner (owner-employees, a self-employed individual, or general partners), cash compensation may not exceed an annual salary of $100,000, as prorated for the Covered Period.
- 8-week: capped at $15,385
- 24-week: capped at $20,833
- For each individual employee, cash compensation may not exceed an annual salary of $100,000, as prorated for the Covered Period
- 8-week: capped at $15,385
- 24-week: capped at $46,154
- Non-cash compensation payroll costs paid or incurred for employee, including employer contributions for employee health insurance, employee retirement plans, and state and local taxes on employee compensation.
Summary of major changes to original SBA guidance on forgiveness
- Portion of PPP loan proceeds that must be used for payroll costs was reduced from 75% to 60%, up to 40% on non-payroll costs
- Loans issued prior to June 5, 2020 have a maturity of 2 years; Loans issued after June 5, 2020 have a maturity of 5 years.
- Borrowers that received PPP loans before June 5, 2020 to elect to use the original 8-week or a 24-week covered period; for all other borrowers, the covered period is 24 weeks.
- For businesses electing to use 24-week covered period, cap on payroll compensation for owner-employees and self-employed individuals is $20,833; for 8-week period, $15,385 is the cap
- A non-payroll cost is eligible for forgiveness if it was i. paid during the covered period or ii. incurred during the covered period and paid on or before the next regular billing date, even if the billing date is after the covered period.
- If FTE reduction occurred, adjustment in loan forgiveness not reduced if FTE reduction eliminated by December 31, 2020 instead of June 30, 2020 (i.e. re-hiring happened or was offered); also known as Safe Harbor FTE reduction.
Note: Make sure to confirm that calculator has been updated based on latest guidance from SBA as of June 26
Note: Tools listed provide varying degrees of functionality related to:
- extracting expense data from relevant reference periods.
- entering detailed expense data
- tracing expenses through to calculation for loan forgiveness amount
Therefore use of other tools to calculate non-payroll and payroll expenses (see Main Menu) may need to be used in conjunction with the forgiveness calculators listed here
Additional information and guidance
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