How much of my PPP loan will be forgiven?
The eight (8) week period to determine loan forgiveness begins on the day that the loan is funded.
The maximum amount of a PPP loan that is eligible for forgiveness is equal to the amount the employer spends on qualifying expenses during the eight-week period which begins on the loan origination date. Qualifying expenses that were in place before February 15, 2020 include the following:
- Payroll costs; salary, wages, and commissions (not to exceed $100,000 per employee)
- Employer retirement contributions
- Employer portion group health benefits
- Rent payments on leases
- Utility payments
- Mortgage and other debt interest payments
No more than 25 percent of the loan forgiveness amount can be attributable to non-payroll costs.
Prior to the start of the eight-week covered period, we recommend that clients project the allowable costs and to use that projection to compare and track to actual costs.
Documentation will be critical to maximize loan forgiveness. Based on what we have seen with banks during the application process, we expect the same will occur with documentation requirements being different for each bank.
The purpose of the PPP loan program is to keep employees working and off of unemployment. The portion of the loan forgiven will be reduced if Compensation levels decrease by more than 25 percent for employees who earn less than $100K or a decrease in the number of FTEs over the eight-week period.
The application for loan forgiveness begins at the end of the eight-week period after the loan is made. Clients will be required to submit a certification stating the forgiveness amount was used for those expenses included above. Banks will have 60 days to decide on portion of the loan that is forgiven.
If you have any questions, please do not hesitate to contact your Core accountant.