How do I calculate my maximum PPP loan amount if I have employees?

April 28, 2020

In this 3-minute read:

• How to calculate your maximum Paycheck Protection Program loan amount if you are a small business that has employees

As businesses across the United States are applying through eligible SBA lenders for their loans allowed under the Paycheck Protection Program (PPP), there is a frequently asked question as to how much that loan will be. 

In order to get your loan approved, we suggest using the calculation outlined below, with the majority of your loan based around your business’s payroll expenses. 

Womply is acting as a facilitator to connect American small businesses to SBA-authorized lenders to get emergency loans for COVID-19 relief. Start your free application here, or call us at 855-208-8813 for a free consultation.

How do I calculate my max PPP loan amount if I have employees?

Small businesses with employees are the most common type of business applying for the PPP loans, because you have heavier payroll expenses to maintain. (And the intent of the Payroll Protection Program is to help save American jobs and small businesses.)

This is a particular challenge if your business has been forced to close or adhere to any kind of limitations due to statewide shutdowns and other social distancing measures during COVID-19.

In order to calculate the maximum PPP loan amount that you can request, use the following steps. 

Step 1: Aggregate payroll costs from the last 12 months

For any employees whose principal place of residence in the United States, add up the total payroll costs that you have had for the last twelve months. 

Step 2: Subtract any compensation that exceeds $100,000 (per employee)

For each employee (or amounts paid to an independent contractor or sole proprietor), subtract any compensation that exceeds $100,000 over the last twelve months. The maximum PPP loan amount allowed is capped at a $100,000 annual salary per employee, including owners, supervisors, and managers.

Step 3: Calculate your business’s average monthly payroll costs

You’ve added up your total payroll costs for the last year. Now divide that number by 12 to get your average monthly payroll expenses. 

Step 4: Multiply the average by 2.5

You are allowed to take out 2.5 times your average monthly payroll costs in order to help your business make it through the next 8 weeks (from the time you receive your loan). Multiply your average monthly payroll expense amount from Step 3 by 2.5. 

Step 5: Add any outstanding EIDL program loan balance

Add the outstanding amount of an Economic Injury Disaster Loan (EIDL) made between January 31, 2020 and April 3, 2020, less the amount of any “advance” under an EIDL COVID-19 loan (because it does not have to be repaid).

Examples of PPP loan calculations for small businesses with and without EIDL loans

Here are some examples showing businesses with various payroll totals, employee compensation levels, and EIDL loan status:

• Example 1 – No employees make more than $100,000
  • Annual payroll: $120,000
  • Average monthly payroll: $10,000
  • Multiply by 2.5 = $25,000
  • Maximum loan amount is $25,000

• Example 2 – Some employees make more than $100,000
  • Annual payroll: $1,500,000
  • Subtract compensation amounts in excess of an annual salary of $100,000: $1,200,000
  • Average monthly qualifying payroll: $100,000
  • Multiply by 2.5 = $250,000
  • Maximum loan amount is $250,000

• Example 3 – No employees make more than $100,000, outstanding EIDL loan of $10,000.
  • Annual payroll: $120,000
  • Average monthly payroll: $10,000
  • Multiply by 2.5 = $25,000
  • Add EIDL loan of $10,000 = $35,000
  • Maximum loan amount is $35,000 

• Example 4 – Some employees make more than $100,000, outstanding EIDL loan of $10,000
  • Annual payroll: $1,500,000
  • Subtract compensation amounts in excess of an annual salary of $100,000: $1,200,000
  • Average monthly qualifying payroll: $100,000
  • Multiply by 2.5 = $250,000
  • Add EIDL loan of $10,000 = $260,000
  • Maximum loan amount is $260,000

New! Try our PPP loan calculator!

Need to apply for your PPP loan?

It’s not too late to apply for a PPP loan for your business, but we strongly suggest you apply as soon as possible. The second round of funding is quickly running out and there is still high demand from business owners across the nation. 

Womply is a verified loan facilitator working with SBA 7(a) approved lenders who are accepting applications, and we can help you through the loan application process and pair you up with an eligible lender. 

Click here to start your free application or reach out to us today at 855-208-8813 for a free consultation.