PPP Loan Forgiveness

PPP Loan Forgiveness

Forgiveness Eligibility

  • Loans can be forgiven up to the full principal amount + accrued interest if proceeds are used for a forgivable purpose and employee compensation levels are maintained during the 8-week covered period.
  • The 8-week period starts as soon as loan funds are disbursed to the borrower.
  • At least 75% of eligible costs sought for forgiveness must be eligible payroll expenses.
  • Payroll expenses: are eligible for 100% forgiveness for the total loan amount.
    • Eligible payroll expenses include: Salary/wages/tips (capped at $100,000 annually per employee), employee benefits, state and local payroll taxes, self-employed wages/commissions/income/net earnings (capped at 100,000 annually), and normal paid sick leave.
    • Qualified Paid Sick Leave and Family leave for which credit is eligible under the Families First Coronavirus Response Act are not eligible payroll expenses.
    • Must maintain staffing and salary/wage levels
  • Other eligible expenses: mortgage interest, rent, and utilities are also forgivable up to 25% of the total loan amount.
    • Mortgages and Leases must have been in effect prior to 2/15/2020
  • Borrowers must apply for forgiveness through lender.
  • Expenses must be documented.
    • Payroll tax reports, payroll provider reports, group healthcare benefits, retirement plan benefits, canceled checks, invoices, receipts, bank statements etc.
    • Many big payroll companies now have PPP reports to provide to lenders
  • For more in-depth resources on calculating loan forgiveness and documentation guidance, see American Institute of CPAs SBA Paycheck Protection Program resource page at aicpa.org.

If Employee Refuses Offer to be Re-hired

  • Borrower can exclude employee from the loan forgiveness calculation if the Borrower made a good-faith, written offer of rehire and documented the employee’s rejection of that offer

What Can Reduce Forgiveness Amount

  • Less than 75% of the loan amount is used for eligible payroll costs
  • Salary/wages reduced by more than 25% for any employee making less than 100,000 annually
  • Reduced number of full-time equivalent employees (FTE)
    • Staff levels should be equal to full time/full time equivalent employees used as the baseline for original loan amount calculation
  • Any amounts used for non-eligible expenses
  • The maximum forgiveness amount for a PPP Loan will be reduced dollar for dollar by the amount of any advance received under the Economic Injury Disaster Loan (EIDL) program.

Borrower Good Faith Certification

  • Any borrower receiving a PPP loan for less than 2 million will be deemed to have made the required certification concerning necessity of the loan request in good faith.

Other PPP Issues

 Joe Schmitz
At-Large Member
Business Law Section Council


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