How much of my PPP loan will be forgiven?

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?

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.

IMPORTANT UPDATE: On June 5, 2020, President Trump signed into law new updates to PPP loan forgiveness requirements, extending the covered period to 24 weeks, and reducing the minimum loan funding that must be spent on payroll to 60%. Please read the details here.

NOTE: On Wednesday, May 13, 2020, the SBA released revisions to their FAQs regarding PPP loan forgiveness. Read the details here

NEW PPP FORGIVENESS UPDATE AS OF JUNE 17, 2020

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.

Womply has partnered with various trusted lenders to offer you the best possible rates on small business funding. Whether you need a term loan, a line of credit, or another type of small business capital, we can help! Click here to learn more.

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 24 weeks; see “important update” above) after you receive your funds, you will have to pay at least part of it back. 

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
  • Decreasing employee salaries and wages by more than 25% if they made under $100,000 in 2019

If you have done either of these things, you have time to make a change in order to get your loan at least partially forgiven. You just need to restore your employee headcount and wage levels by December 31, 2020 for any changes that were made after February 15, 2020. 

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

Womply can help you get the small business funding that’s right for you

Womply has partnered with various trusted lenders to offer you the best possible rates on small business funding. Whether you need a term loan, a line of credit, or another type of small business capital, we can help!

Click here to check out our small business loans resources, or schedule a free, personalized demo of Womply’s small business apps to learn more!

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