In addition to using your loan proceeds for eligible expenses, follow the guidance below to maximize your potential loan forgiveness:
Covered Period
- Start date of the Covered Period is the same day PPP loan funds were received.
- Up to 24 Weeks or 168 Days. For example, PPP Loan funds were received on April 20th, the Covered Period is April 20th – October 4th, with option to keep 8-week covered period, or,
- Borrowers with a bi-weekly (or more frequent) payroll schedule may elect the Alternative Payroll Covered Period (APCP).
- APCP begins on the 1st day of the start of the next pay-period following the PPP Disbursement Date.
- If elected to use the APCP, this only applies to Payroll Costs (Cash & Non-Cash Compensation). You cannot use the APCP for Non-Payroll Costs.
SBA Forgiveness Limitations
Salary/Hourly Wage Reduction:
- A reduction in an employee’s salary or wages of more than 25% will result in a reduction of loan forgiveness.
- To evaluate this reduction, you must go employee by employee and compare the salary/hourly wage percent reduction for the following periods;
- ‘Covered Period’ (or ‘Alternative Payroll Covered Period’, if elected), to
- January 1 – March 31, 2020.
- Safe Harbor – A reduction in loan forgiveness due to salary reduction is not required if you meet A and B, or C.
- A - If average annual salary/hourly wage from February 15 – April 26, 2020 was LESS than salary/hourly wage as of Feb 15, 2020, see Step B.
- B - If average annual salary/hourly wage as of December 31, 2020 is equal or greater than February 15th, 2020, the safe harbor has been met and no Salary/Hourly Wage Reduction is required.
- C - Any employee who earned more than $100k in 2019, no salary reduction is required.
Full-Time Equivalent (FTE) Reduction Quotient:
- Step One - Calculate the FTE Headcount during the ‘Covered Period’ or ‘Alternative Payroll Covered Period’ if elected. You may elect either the ‘Calculation’ or ‘Simplified’ Method. Whichever method is selected, you must use this method throughout.
- Calculation Method
- For each individual FTE, take the average hours worked over the 8-weeks.
- Divide the average weekly hours by 40.
- Round up to the nearest tenth (i.e. 30 / 40 = .75, round to .8)
- Maximum amount for each FTE is 1.0
- Simplified Method
- FTE did work at least 40-hour week on average = 1.0
- FTE did not work at least 40-hour week on average = 0.5
- Step Two – Select a comparison period at your election using the same calculation method.
- February 15, 2019 - June 30, 2019
- January 1, 2020 - February 29, 2020
- For a Seasonal Employer Only - any 12-week period May 1, 2019 - Sept 15, 2019
- Step Three – If Step Two is greater than Step One, you must calculate the FTE Reduction Percentage. This percent reduction will be placed on the amounts previously eligible for forgiveness.
- Safe Harbor – A reduction in loan forgiveness due to FTE Reduction Quotient is not required if you meet A and B. or C or D or E.
- A – If FTE’s from February 15 – April 26, 2020 was LESS than FTE’s as of February 15, 2020, see Step B.
- B – If FTE’s as of December 31st, 2020 is equal or greater than February 15th, 2020, safe harbor has been met.
- C – No reduction in the number of FTE’s between January 1, 2020 and the end of the Covered Period.
- D – If you can show you made a good-faith, written offer to rehire an employee during the covered period but you were rejected by the employee, then that reduction in headcount will not result in a reduction of the forgiveness. This is also true if an FTE was fired for cause, voluntarily resigned, or voluntarily required to receive a reduction in hours.
- E – If able to document an inability to return to prior February 15, 2020 levels of business activity between March 1 – December 31, 2020 due to maintenance of standards requirements related to COVID-19 for; sanitation, Social Distancing or Other Workers/Customer Safety.
Payroll Cost Reduction – 60% Rule
To receive full loan forgiveness, a borrower must use at least 60 percent of the PPP loan for payroll costs, and not more than 40 percent of the loan forgiveness amount may be attributable to non-payroll costs. For example, if a borrower uses 59 percent of its PPP loan for payroll costs, it will not receive the full amount of loan forgiveness it might otherwise be eligible to receive. Instead, the borrower will receive partial loan forgiveness, based on the requirement that 60 percent of the forgiveness amount must be attributable to payroll costs. For example, if a borrower receives a $100,000 PPP loan, and during the covered period the borrower spends $54,000 (or 54 percent) of its loan on payroll costs, then because the borrower used less than 60 percent of its loan on payroll costs, the maximum amount of loan forgiveness the borrower may receive is $90,000 (with $54,000 in payroll costs constituting 60 percent of the forgiveness amount and $36,000 in non-payroll costs constituting 40 percent of the forgiveness amount)
Economic Injury Disaster Loan (EIDL) Advance:
- If you received an EIDL Advance, your PPP Loan forgiveness will be reduced by this amount.
