PPP Loan Forgiveness

How to Use Funds from your PPP loan and adhere to forgiveness guidelines:

The Paycheck Protection Program was created to help you keep your employees at their current base pay and cover other essential business costs. For these loans, 75% of funds must cover payroll costs, while 25% can be used for other qualifying costs (like rent, leases, and utilities) over an eight-week (56-day) period following your loan date of disbursement for it to be 100% forgiven. Any portion of your loan used for non-qualifying costs will not be forgiven, and you’ll be required to pay it back with interest.


The SBA defines qualifying costs as:

  1. Eligible payroll costs: Borrowers are generally eligible for forgiveness for the payroll costs paid and payroll costs incurred during the eight-week (56-day) Covered Period (or Alternative Payroll Covered Period) (“payroll costs”). Payroll costs are considered paid on the day that paychecks are distributed or the Borrower originates an ACH credit transaction. Payroll costs are considered incurred on the day that the employee’s pay is earned. Payroll costs incurred but not paid during the Borrower’s last pay period of the Covered Period (or Alternative Payroll Covered Period) are eligible for forgiveness if paid on or before the next regular payroll date. Otherwise, payroll costs must be paid during the Covered Period (or Alternative Payroll Covered Period). For each individual employee, the total amount of cash compensation eligible for forgiveness may not exceed an annual salary of $100,000, as prorated for the covered period. Count payroll costs that were both paid and incurred only once. Payroll costs consist of compensation to employees (whose principal place of residence is the United States) in the form of:
        •  salary, wages, commissions, or similar compensation; cash tips or the equivalent (based on employer records of past tips or, in the absence of such records, a reasonable, good-faith employer estimate of such tips);
        • payment for vacation, parental, family, medical, or sick leave; an allowance for separation or dismissal; payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums, and retirement; payment of state and local taxes assessed on the compensation of employees; and for an independent contractor or sole proprietor, wages, commissions, income, or net earnings from self-employment, or similar compensation. See 15 U.S.C. 636(a)(36)(A)(viii); 85 FR 20811, 20813.
  2. Eligible nonpayroll costs: Nonpayroll costs eligible for forgiveness consist of:
      1. 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”);
      2. 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
      3. 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. Eligible nonpayroll costs cannot exceed 25% of the total forgiveness amount. Count nonpayroll costs that were both paid and incurred only once.

The amount of loan forgiveness the Borrower applies for may be subject to reductions as explained in PPP Loan Forgiveness Application, Schedule A.


What costs DO NOT meet PPP loan forgiveness requirements?

The SBA has also defined non-qualifying costs, so make sure you don’t count them towards your average monthly payroll nor use a PPP loan to pay for the following:

  • Employee compensation for workers whose main residence is outside of the U.S.;
  • Compensation for an individual employee whose annual salary exceeds $100,000 (prorated as necessary);
  • Compensation for workers who receive 1099s instead of W-2s;
  • Federal employment taxes imposed or withheld between February 15, 2020, and June 30, 2020, including the employee’s and employer’s share of FICA (Federal Insurance Contributions Act) and Railroad Retirement Act taxes, and income taxes required to be withheld from employees; and
  • Qualified sick and family leave wages for which a credit is allowed under sections 7001 and 7003 of the Families First Coronavirus Response Act (Pub. L. 116–127).

How to Apply for Loan Forgiveness:

Click Here to download the new Loan Forgiveness Application.  To apply for forgiveness of your Paycheck Protection Program (PPP) loan, you (the Borrower) must complete this application as directed in the application instructions, and submit it to your Lending Bank.

Click Here to review the Loan Forgiveness Interim Final Rule.

Click Here to review the Lender Responsibilities and SBA Loan Review Procedures.  

At the end of the eight-week (56-day) covered period after you received the loan proceeds, you can apply using the Forgiveness Application directly with the Lending Bank. You should include:

  • PAYROLL:  Documentation verifying the eligible cash compensation and non-cash benefit payments from the Covered Period or the Alternative Payroll Covered Period. 
  • FTE:  Documents may include payroll tax filings reported, or that will be reported, to the IRS (typically, Form 941) and state quarterly business and individual employee wage reporting and unemployment insurance tax filings reported, or that will be reported, to the relevant state. Documents submitted may cover periods longer than the specified time period.
  • NON-PAYROLL:  Documentation verifying the existence of the obligations/services prior to February 15, 2020, and eligible payments from the Covered Period.

The above documentation details are listed on page 10 of the Forgiveness Application. Click Here to see the details.



Documents that Each Borrower Must Maintain for Six (6) Years, but is Not Required to Submit: All records relating to the Borrower’s PPP loan, including documentation submitted with its PPP loan application, documentation supporting the Borrower’s certifications as to the necessity of the loan request and its eligibility for a PPP loan, documentation necessary to support the borrower’s loan forgiveness application, and documentation demonstrating the  Borrower’s material compliance with PPP requirements. The Borrower must retain all such documentation in its files for six years after the date the loan is forgiven or repaid in full, and permit authorized representatives of SBA, including representatives of its Office of Inspector General, to access such files upon request. 


The Lending Bank and or the SBA reserves the right to require more information.  There will be NO forgiveness if the documentation is not presented and accepted.

Your Lending Bank will then have 60 days to reply on whether or not you qualify for loan forgiveness, and the SBA has 90 days to approve your loan forgiveness.

Please refer back to this page often as we will continue to update it as new guidance becomes available from the SBA and the Department of Treasury.

Last Update 05/26/2020