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TO BE UPDATED FOR THE PPP FLEXIBILITY ACT – DOWNLOAD TEMPORARILY DISABLED
(PPP Loan Forgiveness Calculator will be updated as further guidance is issued by the SBA, so check back for updates – current version follows the format of SBA Form 3508 – Loan Forgiveness Application)
Forgiveness FAQ’s and Documentation Requirements
How much of my loan will be forgiven? You will owe money when your loan is due if you use the loan amount for anything other than payroll costs, mortgage interest, rent, and utilities payments over the 24 weeks (or for if elected for loans received prior to June 5, 2020, 8 weeks) after getting the loan. Not more than 40% of the forgiven amount may be for non-payroll costs. Your forgiveness amount may also be reduced if you do not maintain your staff and payroll at levels prior to the Covid-19 pandemic, subject to various safe harbors.
When does that eight-week covered period begin? Covered Period: The Covered Period of your PPP loan begins on the same date that you received the PPP loan proceeds and is for either 24 weeks or for loans received before June 5, 2020, you may elect an 8 week covered period.
Alternative Payroll Covered Period: For administrative convenience, Borrowers with a biweekly (or more frequent) payroll schedule may elect to calculate eligible payroll costs [only] using the 24 or 8 week period, that begins on the first day of their first pay period following their PPP Loan Disbursement Date (the “Alternative Payroll Covered Period”).
For example if the borrower elected the 8 week covered period instead of the 24 week period, and if the borrower received its PPP loan proceeds on Monday, April 20, and the first day of its first pay period following its PPP loan disbursement is Sunday, April 26, the first day of the Alternative Payroll Covered Period is April 26 and the last day of the Alternative Payroll Covered Period is Saturday, June 20. Borrowers who elect to use the Alternative Payroll Covered Period must apply the Alternative Payroll Covered Period wherever there is a reference in the SBA Form 3508 loan forgiveness application to “the Covered Period or the Alternative Payroll Covered Period.” However, Borrowers must apply the Covered Period (not the Alternative Payroll Covered Period) wherever there is a reference in Form 3508 to “the Covered Period” only.
What are eligible nonpayroll costs? Eligible nonpayroll costs. Nonpayroll costs eligible for forgiveness consist of:
(a) covered mortgage obligations: payments of interest (not including any prepayment or payment of principal) on any business mortgage obligation on real or personal property incurred before February 15, 2020 (“business mortgage interest payments”);
(b) covered rent obligations: business rent or lease payments pursuant to lease agreements for real or personal property in force before February 15, 2020 (“business rent or lease payments”); and
(c) covered utility payments: business payments for a service for the distribution of electricity, gas, water,
transportation, telephone, or internet access for which service began before February 15, 2020 (“business utility payments”).
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.
Count nonpayroll costs that were both paid and incurred only once. Eligible nonpayroll costs cannot exceed 25% of the total forgiveness amount.
How can I request loan forgiveness? You can submit a request to the lender that is servicing the loan, using SBA Form 3508. Ask your lender if they have any other specific requirements or additional forms to submit. The request will include completion of SBA Form 3508 – Loan Forgiveness application and documents that verify the number of full-time equivalent employees and pay rates, as well as the payments on eligible mortgage interest, lease, and utility obligations. You must certify that the documents are true and that you used the forgiveness amount to keep employees and make eligible mortgage interest, rent, and utility payments. The lender must make a decision on the forgiveness within 60 days.
How are Average Full Time Equivalents (FTE) computed? For each employee, compute the average number of hours paid per week, divide by 40, and round the total to the nearest tenth. The maximum for each employee is capped at 1.0. An alternative simplified method maybe used that assigns a 1.0 for employees who work 40 hours or more per week and 0.5 for employees who work fewer hours may be used at the election of the Borrower. Only one method may be chosen for periods for which an FTE calculation is required to be calculated.
Can lenders rely on borrower documentation for loan forgiveness? Yes. The lender does not need to conduct any verification if the borrower submits documentation supporting its request for loan forgiveness and attests that it has accurately verified the payments for eligible costs.
Is the PPP loan forgiveness taxable? The forgiveness of small business loans under the Paycheck Protection Program (PPP) will not be subject to federal income tax. We expect that PPP loan forgiveness will not be taxable for state or local income tax purposes but await further guidance from the states and local taxing jurisdictions. [update April 30, 2020: The IRS issued Notice 2020-32 on April 30, 2020 which denies a tax deduction for “covered costs” in an equal amount to the loan forgiveness amount, essentially making the debt forgiveness amount tax neutral, with no tax benefit to the recipient of the loan forgiveness.][Congress is currently considering over-ruling the IRS ruling with a technical correction to the legislation, but for now, the IRS ruling stands.]
The SBA released instructions on the type of documents that must be submitted with your PPP Loan Forgiveness Calculation and/or maintained by you. Click here to read about required documentation.
THERE IS EXPECTED TO BE FURTHER GUIDANCE ON THE VARIOUS COMPUTATIONS SURROUNDING LOAN FORGIVENESS WITH RESPECT TO SBA PPP LOANS. THE PPP LOAN FORGIVENESS CALCULATOR IS FOR PRELIMINARY ESTIMATES OR MODELING OF POTENTIAL LOAN FORGIVENESS AMOUNTS ONLY. THE CALCULATOR MAY NOT REFLECT CURRENT INTERPRETATIONS OF THE SBA AND TREASURY DEPT.