How much of my PPP loan will be forgiven? (important updates for 2021)

Important PPP update for 2021

On December 22, 2020, Congress passed a bill renewing funding under the CARES Act, including an additional $284 billion earmarked for America’s struggling small businesses. The rules and application process for PPP loans and forgiveness have been modified, with more businesses eligible for PPP loans, more expenses forgivable, and a simplified application process. Also there is provision for “second draw” PPP loans for businesses that received PPP funding in 2020. Start your PPP loan application now!


In this 2-minute read:

  • How much of the loan can be forgiven?
  • What can cause a PPP loan’s forgiveness amount to be reduced?
  • Is PPP loan forgiveness automatic or do I need to do something?
  • For 2021, PPP loans will cover additional expenses, including operations expenditures, property damage costs, supplier costs, and worker protection expenditures

As businesses are receiving their PPP loans to help them through the COVID-19 crisis, it’s important to know how to allocate and document the funds you get in order to have your loan forgiven. 

The Paycheck Protection Program’s primary purpose is to help businesses maintain their employee wages and payroll expenses, so the rules for loan forgiveness favor its use for maintaining your payroll.


The Treasury released a new IFR and an “easy” version of the PPP loan forgiveness application on June 17, 2020. Please read the full details here.

Here’s how borrowers decide which forgiveness application to use. You may use Form 3508EZ if:

  • You are self-employed and have no employees; OR
  • You did not reduce the salaries or wages of employees by more than 25%, and did not reduce the number or hours of employees; OR
  • You experienced reductions in business activity as a result of health directives related to COVID-19, and did not reduce the salaries or wages of employees by more than 25%.

If you don’t fit into any of the above conditions, you will need to complete and submit the full PPP loan forgiveness application.

Get your PPP loan or second draw PPP loan through Womply! Womply has helped over 200,000 businesses get their PPP funding. It’s free to apply for a PPP loan, and Womply can help connect you with an SBA lender that’s right for you! Start your PPP application.

How much of my PPP loan can be forgiven?

You have the potential to have your entire PPP loan forgiven, which is a huge motivator for small businesses to use it properly. Your loan forgiveness depends on what you use the funds for. If you use your PPP loan for anything other than payroll costs and approved business expenses like mortgage payments, rent, and utilities over the 8 weeks (or up to 24 weeks; see “important update” above) after you receive your funds, you will have to pay at least part of it back. For 2021, PPP loans will cover additional expenses, including operations expenditures, property damage costs, supplier costs, and worker protection expenditures.

Initially, no more than 25% of the forgiven amount could be used to cover non-payroll costs if you wanted your PPP loan completely forgiven. That has been changed to 40% as of June 5, 2020. (60% of PPP funds must be spent on payroll costs to achieve full loan forgiveness.) 

What can cause a reduction in my PPP loan forgiveness amount?

The following items can cause you to have your loan forgiveness amount reduced:

  • Decreasing your full-time employee headcount after February 15, 2020 (see below for important conditions/exceptions to this rule for 2021)
  • Decreasing employee salaries and wages by more than 25% if they made under $100,000 in 2019
  • Spending less than 60% of your PPP funds on approved payroll costs

If you have done any of these things, your loan may not be fully forgiven.

Note for 2021: there are exceptions to the “maintain payroll and headcount” rule

There are new exceptions for 2021 to the requirement that you maintain employee and compensation levels in order to achieve full loan forgiveness, including:

A borrower received a PPP loan of $50,000 or less

If you received a PPP loan that was $50,000 or less, you are exempt from having to maintain your employee and compensation levels in order to receive loan forgiveness. Your loan must still be spent on approved costs and maintain that 60% will go towards payroll. 

You’ll also have an alternative loan forgiveness form than businesses with larger loan amounts. 

An employee quit, retired, or was fired (with just cause)

If you couldn’t maintain employee levels due to someone quitting or being fired with just cause, then you can still qualify for your full loan forgiveness. But, it’s very important that you document each of these instances so that you can verify this when you apply for loan forgiveness. 

You’ll need documentation to explain why your employee was fired or other supporting documents to verify an employee’s termination.

Do I still need to restore payroll or headcount to previous levels in order to receive forgiveness if I get my PPP loan after 12/27/20?

No. Businesses and eligible organizations and individuals that receive PPP loans after December 27th, 2020 are not required to “rehire” any employees in order to receive forgiveness. You will, however, need to maintain current payroll levels during the forgiveness period. (Exceptions to this would include employees who resign or are terminated with cause).

If you’ve kept those requirements for the 8 (or 24) weeks after you received your PPP loan, at that point you may apply for loan forgiveness through the lender that serviced your loan.

In order to request any amount of forgiveness on your loan, you will need to verify that your loan was used for the required expenses, which means you’ll need documented proof.

Have more questions? Here are some other helpful articles about PPP loan forgiveness:

Let Womply help you apply for your PPP loans!

As you know, it’s free to apply for a PPP loan, and we know you have lots of choices. So why should you let Womply connect you with an approved SBA lender? Because we know what we’re doing and people love the help we provide. We’ve helped over 200,000 businesses, contractors, sole proprietors, and self-employed individuals get approved. Don’t wait! The deadline is March 31, 2021.

Start your PPP application now!

Learn more, plus get free reputation monitoring and customer insights when you sign up for Womply Free!


COVID-19 stimulus for consultants, contractors, agents (BIG PPP RULE CHANGE)

In this 5-minute read: Paycheck Protection Program (NEW RULES/BENEFIT FOR SCHEDULE C FILERS!) Pandemic Unemployment Assistance (PUA) benefits SBA Economic […]

Read More

Does California Prop 22 impact PPP loans? (plus NEW RULE CHANGES)

In this 3-minute read: What is California Prop 22? How does it affect app-based drivers who want to apply for […]

Read More

Can consultants apply for PPP loans? (important updates!)

In this 4-minute read: Do consultants qualify for PPP loans? What other eligibility requirements should you be aware of? Recent […]

Read More

Can real estate agents get PPP loans? (important changes for 2021!)

In this 4-minute read: Can real estate agents apply for PPP loans? Are there any other PPP loan eligibility requirements? […]

Read More

PPP UPDATE: New max loan amount calculation for Schedule C borrowers

In this 3-minute read: What changes to the PPP process will impact “Schedule C filers”? New rules will allow certain […]

Read More

14-day PPP exclusivity period starts today: what you need to know

In this 3-minute read: PPP “Exclusive Application Period” opens 2/24/21 and continues through 3/9/21 Businesses with 20 or more employees […]

Read More

Start Your PPP Application.

What describes you or your business best?

My business has multiple employees.

My business does not have multiple employees and/or I work for myself (e.g., Uber drivers, DoorDash couriers, independent contractors).