Paycheck Protection Program Loan Forgiveness

If you receive funds from the Paycheck Protection Program (“PPP”)  we want to ensure that you are able to receive the maximum amount of loan  forgiveness.  You should not make expenditures you would not otherwise incur just so that you receive full forgiveness of the loan.  We would like to offer you the following recommendations to account  for the loan proceeds:


  • All funds should be deposited into separate bank accounts. These funds need to be kept separate from any operating revenue bank account. You need to be able to account for all funds and how they were used separately.
  • Establish a separate Class in your General Ledger Software to track PPP related expenses.
  • Create a PPP file to organize and retain invoices and proof of payments for all PPP related disbursements.
  • Guidelines for Forgiveness:

– You can use for payroll costs (including health insurance and retirement benefits), rent and utilities.

– You cannot use more than 25% of the forgiveness amount for rent and utilities. The lease and services agreements have to be dated before February 15, 2020.

– Payroll annualized above $100,000 will not count towards forgiveness.

– You can use to pay the interest on your mortgage but not for principal payments.

There are two restrictions that also impact forgiveness:

Headcount – you cannot reduce headcount (based on Full Time Equivalents “FTE”).   If you’ve had a decrease in headcount in 2019 or 2020, please discuss with us.

Compensation – compensation levels cannot be reduced by more than 25% for any one employee (unless they make over $100,000). If employees have been furloughed or laid-off, then you may hire them back and make up salary that was missed to ensure full forgiveness. The time period used for comparison is the most recent full quarter that the employee was employed.


Example Forgiveness Calculation:

X Co. borrowed $100,000 in PPP proceeds on April 10, 2020. Over the next 8 weeks, X Co. spent $50,000 on payroll costs and $40,000 on rent and utilities. X Co.’s loan forgiveness is limited to $66,667: $50,000 of payroll costs and $16,667 of rent and utilities. Your non-payroll expenses cannot exceed 25% of the forgiveness amount.


*As of April 15, 2020 the SBA has indicated that further guidance on the details of the forgiveness will be released in the future.

Please reach out to us with any questions regarding your PPP funds.