Paycheck Protection Program (PPP) Loan Forgiveness Estimator

First, determine your Average FTEs during your chosen covered period and the defined look-back period (referred to in the Loan Forgiveness Application as the Chosen Reference Period). Your look-back period, is, at your election, either (i) Feb. 15, 2019 to June 30, 2019; (ii) Jan. 1, 2020 to Feb. 29, 2020; or (iii) in the case of seasonal employers, either of the preceding periods or a consecutive twelve-week period between May 1, 2019 and Sept. 15, 2019. A seasonal employer that elects to use a 12-week period between May 1, 2019 and Sept. 15, 2019 to calculate its maximum PPP loan amount must use the same 12-week period as the reference period for calculation of any reduction in the amount of loan forgiveness.

Next, sum the aggregate total of FTE employees for both the Chosen Reference Period and your chosen covered period, by adding all employee-level FTE employee calculations. You then divide the average FTE employees during your look-back period by the average FTE employees during your Chosen Reference Period, the result is the FTE Reduction Quotient. You may be exempt from this reduction if you qualify for one of two FTE Safe Harbors.

Borrowers must divide the average number of hours paid for each employee per week by 40, capping this quotient at 1.0. For employees who were paid for less than 40 hours per week, borrowers may choose to calculate the full-time equivalency in one of two ways.

• First, the borrower may calculate the average number of hours a part-time employee was paid per week during the covered period. For example, if an employee was paid for 30 hours per week on average during the covered period, the employee is an FTE employee of 0.75. Similarly, if an employee was paid for ten hours per week on average during the covered period, the employee is an FTE employee of 0.25.
• Second, for administrative convenience, borrowers may elect to use a full-time equivalency of 0.5 for each part-time employee who worked less than 40 hours per week..

Borrowers may select only one of these two methods and must apply that method consistently to all their part-time employees for the covered period or the alternative payroll covered period and the selected reference period.

If an employer reduces the number of FTEs during the covered period, then the amount of loan forgiveness eligibility will be reduced proportionately. The following formulas will be used based on reductions in the number of FTEs:

• Average number of FTEs per month* employed by the borrower during the covered period divided by either the:
  • Average number of FTEs per month employed by the borrower from Feb. 15, 2019 to June 30, 2019, or
  • Average number of FTEs per month employed by the borrower from Jan. 1, 2020 to February 29, 2020.

*The average number of FTEs is determined by calculating the average number of FTEs for each pay period falling within a month.

Two separate safe harbors may exempt borrowers from any loan forgiveness reduction based on a reduction in FTE employee levels:

FTE Reduction Safe Harbor 1. The borrower is exempt from the reduction in loan forgiveness based on a reduction in FTE employees described above if the borrower, in good faith, is able to document that it was unable to operate between Feb. 15, 2020, and the end of the Covered Period at the same level of business activity as before Feb. 15, 2020, due to compliance with requirements established or guidance issued between March 1, 2020 and Dec. 31, 2020, by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration, related to the maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID-19.

FTE Reduction Safe Harbor 2. The borrower is exempt from the reduction in loan forgiveness based on FTE employees described above if both of the following conditions are met: (1) the borrower reduced its FTE employee levels in the period beginning Feb. 15, 2020, and ending April 26, 2020; and (2) the Borrower then restored its FTE employee levels by not later than Dec. 31, 2020 to its FTE employee levels in the Borrower’s pay period that included Feb. 15, 2020.

Yes. A borrower is eligible for an FTE Reduction Exceptions for:

(1) any positions for which the borrower made a good-faith, written offer to rehire an individual who was an employee on February 15, 2020 and the borrower was unable to hire similarly qualified employees for unfilled positions on or before December 31, 2020;

(2) any positions for which the borrower made a good-faith, written offer to restore any reduction in hours, at the same salary or wages, during the borrower’s covered period and the employee rejected the offer, and

(3) any employees who during the borrower’s covered period who were

• were fired for cause,
• voluntarily resigned, or
• voluntarily requested and received a reduction of their hours.

In each of these cases the borrower will list the FTE on the FTE Reduction Exception line on Tables 1 or 2 in the Loan Forgiveness Application, Schedule A Worksheet only if the position was not filled by a new employee. Any FTE reductions in these cases do not reduce the Borrower's loan forgiveness. It is important that borrowers maintain documentation supporting the exceptions.

Borrowers are required to inform the applicable state unemployment insurance office of any employee’s rejected rehire offer within 30 days of the employee’s rejection of the offer. The documents that borrowers should maintain to show compliance with this exemption include the written offer to rehire an individual, a written record of the offer’s rejection, and a written record of efforts to hire a similarly qualified individual.

Yes. The FTE Reduction Exceptions apply to all employees, not just those who would be listed in Table 1 of the Loan Forgiveness Application (SBA Form 3508 or lender equivalent). Borrowers should therefore include employees who made more than $100,000 in the FTE Reduction Exception line in Table 1 of the PPP Schedule A Worksheet.

Your forgiveness may be reduced proportionately to your Full-time Equivalent (FTE) reduction, unless you are eligible for an FTE Reduction Exception or FTE Reduction Exemption.

Your loan forgiveness amount may be less, depending on whether the salary or hourly wages of certain employees during your covered period as compared to the period from Jan. 1, 2020 to March 31, 2020. For employees whose wages or pay decreases by more than 25%, if the change is solely due to a decrease in the employee’s FTE status, an employer may not have to take the wage reduction on this employee. For example: An hourly wage employee had been working 40 hours per week during the borrower selected reference period (FTE employee of 1.0) and the borrower reduced the employee’s hours to 20 hours per week during the covered period (FTE employee of 0.5). There was no change to the employee’s hourly wage during the covered period. Because the hourly wage did not change, the reduction in the employee’s total wages is entirely attributable to the FTE employee reduction and the borrower is not required to conduct a salary/wage reduction calculation for that employee.

You also may be exempt from this reduction if you fully restore salary and the hourly wage rate by Dec. 31, 2020.

To calculate whether a salary/hourly wage reduction is required you will calculate the average salary or hourly wage rate reduction for each FTE employed during the covered period who either was hired in 2020 OR received $100,000 or less on an annualized basis during any pay period in 2019 as compared to a defined look-back period (first quarter 2020).

For more details on calculating the salary/hourly wage reduction, read our PPP Flexibility Act article.

If a borrower restores reductions made to employee salaries and wages or FTE employees by not later than Dec. 31, 2020 the borrower can avoid a reduction in its loan forgiveness amount. If certain employee salaries and wages were reduced between Feb. 15, 2020 and April 26, 2020 (the safe harbor period) but the borrower eliminates those reductions by Dec. 31, 2020 or earlier, the borrower may be exempt from any reduction in loan forgiveness amount that would otherwise be required due to reductions in salaries and wages under section 1106(d)(3) of the CARES Act.

There is no penalty for early repayment. Interest will begin when you receive your loan amount however you can defer payments of your loan principal, interest and fees until the date on which the forgiveness amount is remitted to your lender. Any amount not forgiven must be paid back at 1% interest over a five year-term (for loans made on or after the effective date of the PPP Flexibility Act) or two years if made before, and not renegotiated with your lender.

Any amounts not forgiven must be paid back over a five-year term (for loans made on or after the effective date of the PPP Flexibility Act) or two years if made before, and not renegotiated with your lender. The interest on your loan is capped at 1% and payments of loan principal, interest and fees may be deferred until the date on which the forgiveness amount is remitted too your lender. Interest will begin to accrue when you receive your loan.

The full principal amount and any accrued interest can be forgiven for funds used to pay for covered costs during the covered period.

The lender has up to 60 days to make a decision on forgiveness before making a recommendation to the SBA. Legislation states the SBA has an additional 90 days to review the recommendation, but it taking longer for larger loans. Payments of loan principal, interest and fees may be deferred until the date on which the forgiveness amount is remitted to your lender. Interest will accrue during this time. For more details, go to the SBA FAQs.

For PPP loans taken in 2020 under the CARES Act, there are several factors that could impact forgiveness.

• Fail to maintain the same number of full-time equivalent (FTE) employees during the covered period compared to a defined look-back period (the FTE Reduction adjustment)
• Decrease wages in your covered period for employees earning $100,000 or less (annualized per pay period in 2019) by more than 25% when compared to an employee’s average weekly salary wages during the first Quarter (the Salary/Hourly Wage Reduction Adjustment)
• Do not use 60% of your loan amount on payroll costs. However, you are still eligible for partial loan forgiveness if you use less than 60%.

For PPP loans taken under the Consolidated Appropriations Act, 2021 or for PPP loans made in 2020 that had yet to be forgiven by the SBA, the rules from the 2021 Forgiveness Interim Final Rule apply. Many of the rules above still apply, but some changes include:  

• EIDL Advances no longer reduce the final forgiveness amount of a PPP Loan

One of the biggest changes under the Consolidated Appropriations Act, 2021, was the addition of what could be included as covered non-payroll costs.

• Payroll costs (including employer paid employee benefits, employer paid state and local taxes, hazard pay and bonuses are considered in the 60%)
  • Costs related to the continuation of group healthcare benefits during periods of paid sick, medical, or family leave, and insurance premiums
• Non-Payroll Costs
  • Interest payments on any covered mortgage obligation incurred before Feb. 15, 2020
  • Payment of rent under a lease in force prior to Feb. 15, 2020
  • Utility payments for which service began before Feb. 15, 2020
  • Interest payments on any other debt obligations that were incurred before Feb. 15, 2020

Newly added the list of covered non-payroll costs:

• Operations expenditures
• Property damage expenditures
• Worker protection expenditures
• Supplier costs

For more details on what qualifies under each of these new covered non-payroll costs, read this article in our WORX library that includes several videos.

Your payroll costs are the sum of the compensation, employer paid benefits, and employer assessed state and local taxes paid or incurred during your covered period. To calculate your payroll costs for PPP loan forgiveness during your covered period you must follow the steps below:

• Calculate the eligible compensation (capped at $100,000 per year annualized; for 24 weeks, a maximum of $46,154 per individual, or for eight weeks, a maximum of $15,385 per individual) paid or incurred for your employees during the covered period. Compensation includes salary, vacation, leave (sick, parental, family, and medical), severance pay, wages, commissions or similar compensation, and cash tips.
• Apply the $100,000 salary cap for highly compensated employees and sole proprietors
• Add Employer paid benefit costs. Include payment for: Group health care benefits, including insurance premiums, and retirement during the covered period.
• Add Employer paid state and local taxes on the eligible compensation.

Yes, if the payroll costs are paid on or before the next regular payroll date after the Covered Period or Alternative Payroll Covered Period.

For an example that illustrates this, check out these FAQs.

No. Payroll costs incurred or paid during the Covered Period are eligible for loan forgiveness. The SBA FAQs include examples to illustrate

• Forgiveness is capped at 2.5 months’ worth (2.5/12) of an owner-employee or self-employed individual’s 2019 or 2020 compensation (up to a maximum $20,833 per individual in total across all businesses).
• Total compensation may not exceed $100,000 on an annualized basis, as prorated for the period during which the payments are made or the obligation to make the payments is incurred.1
  • Example:
    • Borrower elected an eight-week covered period, the amount of loan forgiveness requested for owner-employees and self-employed individuals’ payroll compensation is capped at eight weeks’ worth (8/52) of 2019 or 2020 compensation or $15,385 per individual, whichever is less, in total across all businesses.
    • Borrower elected to use a 10-week covered period, the cap is 10 weeks’ worth (10/52) of 2019 or 2020 compensation (approximately 19.23 percent) or $19,231 per individual, whichever is less, in total across all businesses.
    • Covered periods longer than 2.5 months, the amount of loan forgiveness requested for owner-employees and self-employed individuals’ payroll compensation is capped at 2.5 months’ worth (2.5/12) of 2019 or 2020 compensation (up to $20,833) in total across all businesses.

What can be included may depend on your entity type, so review data on the SBA website for more details.

The Federal Unemployment Tax (FUTA) is not included in the PPP loan calculation.1

Your non-payroll costs are the sum of the

• Interest payments on any covered mortgage obligation in force before Feb. 15, 2020
• Payment of rent under a lease in force prior to Feb. 15, 2020
• Utility payments for which service began before Feb. 15, 2020
• Covered operations expenditures include payment for any business software or cloud computing service that facilitates business operations such as the processing, payment, or tracking of payroll expenses
• Covered property damage cost is a cost related to property damage and vandalism or looting due to public disturbances that occurred during 2020 that was not covered by insurance or other compensation.
• Covered supplier costs are expenditures made by a borrower to a supplier for goods under certain conditions
• Worker protection expenditures include, but are not limited to, operating or a capital expenditure to adapt a business to comply with requirements or guidance issued by a government entity such as OSHA in an effort to maintain standards for sanitation, social distancing, or any other safety requirement related to COVID–19, beginning on March 1, 2020 and ending the date on which the national emergency declared by the president.
• For more details on non-payroll costs, read this article on the Consolidated Appropriations Act, 2021.

Non-Payroll Costs are costs paid or incurred during the Covered Period beginning on the date you received your loan.

a) Yes, eligible non-payroll costs incurred prior to the Covered Period and paid during the Covered Period are eligible for loan forgiveness.1

b) Yes, non-payroll costs are eligible for loan forgiveness if they were 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.

Details for how this works are provided on the SBA website

Nonpayroll costs are eligible for loan forgiveness if they were 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.1

Details of how this works are provided on the SBA website.

No. The Alternative Payroll Covered Period applies only to payroll costs, not to nonpayroll costs. The Covered Period always starts on the date the lender makes a disbursement of the PPP loan. Nonpayroll costs must be paid or incurred during the Covered Period to be eligible for loan forgiveness.1

Employees who made more than $100,000 (annualized) for any pay period in 2019 are removed from the loan forgiveness salary/hourly wage reduction calculation. Further, for each individual employee, the total amount of cash compensation eligible for forgiveness may not exceed an annual salary of $100,000, as prorated for the covered period.1

If you didn’t process with Paychex last year and wages were loaded in a lump sum, we can use information from payrolls we processed as well as the historical data provided at onboarding. However, we still need the client to verify the information.

No. Payroll costs must be paid or incurred during your covered period. If incurred during the last period of your covered period, the payroll costs must be paid on or before the next regularly scheduled payroll date.1

Based on guidance the wages that can be included in payroll cost must be paid or earned during your covered period.1

Your loan forgiveness amount may be reduced if you:1

• Fail to maintain the same number of full-time equivalent (FTE) employees during the covered period compared to a defined look-back period (the FTE Reduction adjustment)
• Decrease wages in your covered period for employees earning $100,000 or less (annualized per pay period in 2019) by more than 25% when compared to an employee’s average weekly salary wages during the first Quarter (the Salary/Hourly Wage Reduction Adjustment)

The forgiveness amount might be further reduced if, during the coverage period you:

• Do not use 60% of your loan amount on payroll costs. However, you are still eligible for partial loan forgiveness if you use less than 60%.

A PPP loan is intended to help business owners keep their employees on the payroll, return those who might have been furloughed, and keep their business open by offering loans that are forgivable for funds used on eligible covered costs.

Note: The PPP loan application process closed May 4, 2021 to most businesses as the SBA stopped accepting applications from most lenders as the general fund pool exhausted. However, funding might be available for lenders designated as community financial institutions. Plus, you can still learn about other available funding options.

Eligible payroll and non-payroll costs (business payments for mortgage interest, rent and utilities) paid or incurred during your covered period.

Borrowers are generally eligible for forgiveness for the payroll costs (also referred to in the Loan Forgiveness Application as eligible payroll costs) paid or incurred during their covered period. Payroll costs include:

• Cash compensation (gross salary, wages, tips, commissions, and paid leave, bonuses, hazard pay, etc. paid or incurred during your chosen covered period (total not to exceed $100,000, annualized for your covered period for each employee. For 24 weeks, the maximum is $46,154 per individual, or for eight weeks, a maximum of $15,385 per individual)
• Employer paid benefits (group health care coverage such as insurance premiums and retirement contributions)
• Employer assessed state and local taxes

There is an Interim Final Rule providing guidance for independent contractors or sole proprietors. Read more in this article about the PPP.

Non-payroll costs eligible for forgiveness consist of:1

• Business mortgage interest payments. Payments of interest (not including any prepayment or payment of principal) on any business mortgage obligation on real or personal property incurred before Feb. 15, 2020
• Business rent or lease payments. Business rent or lease payments pursuant to lease agreements for real or personal property in force before Feb. 15, 2020
• Business utility payments. Business payments for a service for the distribution of electricity, gas, water, transportation, telephone, or internet access for which service began before Feb. 15, 2020.

An eligible nonpayroll cost must be paid during the Covered Period or 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. Borrowers must use the covered period that begins on the date they received their loan, even if they elected the Alternative Covered Period. Eligible nonpayroll costs cannot exceed 40% of the loan forgiveness amount. Count nonpayroll costs that were both paid and incurred only once.

Any advance received for the EIDL program under the CARES Act reduces your loan forgiveness by the amount of the advance.1

Interest on your PPP Loan is 1% and begins to accrue when you receive your loan. Payments of loan principal, interest, and fees are deferred until the date on which the forgiveness amount is remitted to your lender.1