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By Numbers Blog

Full PPP Forgiveness

PP loan forgiveness

The Small Business Administration (SBA) recently clarified a number of requirements needed to get full or partial loan forgiveness under the Payroll Protection Program (PPP). The finance relief program for small business owners is worth $660 billion. It aims to provide financial relief to small businesses and freelancers.

In order to make sure you are eligible for full or at least partial loan forgiveness, the SBA has set layered parameters. The forgiveness process scans the 24-week duration of your loan usage to figure out how well you've used the loan money.

Previously, this duration lasted eight weeks, but due to the COVID-19 pandemic damages, this length of the forgiveness term has been increased. With this increase, most freelancers, independent contractors, and small business owners will be able to get full forgiveness.

The maturity date of the Flexibility Act has also been increased from two years to five years. This is only for those who applied for loans after June 5th. It can also be applied to previous loans if the lender and borrower mutually agree.

To check if, and how much, eligible you are for PPP loan forgiveness, here's what you need to keep in mind:


Previously, the eligible expenses' ratio of payroll and non-payroll expenses was 75% to 25%. However, this was a tough line to meet during the COVID-19 era. After the signing of PPP's Flexibility Act on June 5th, the margins have been set at 60% payroll and 40% non-payroll expenses. Here's how you can distribute your loans between the two categories:


  • Employees' salaries, tips, bonuses, incentives, hazard pays. The max amount is $100,000 per employee.
  • Employee benefits such as vacations, sick leaves, retirement benefits, insurance, family and parental expenses, etc.
  • Compensated tax payments, including state and local taxes on your business


  • Mortgage Interests
  • Rent
  • Utility Services

All of these Non-Payroll Expenses should have been in service before February 15th, 2020.


  • Employer share of payroll taxes doesn't qualify for payroll costs.
  • Federal taxes withheld from employees don't count, either.
  • Self-employed people have to spend 60% on wages, commissions, and other finances of self-employment. Self-employed earners have a loan forgiveness cap, too. This limit is an estimated 15.38% of your previous year's compensation.

The documentation of all your expenses starts the minute you get your very first loan disbursement. Your status of forgiveness depends on the costs during the next twenty-four weeks. For those who couldn't spend the full loan amount, they can return the leftover money to their lender. Or, they can keep using this loan with a 1% interest rate.


To keep a check-and-balance on honest loan consumption, the PPP Flexibility Act wants you to keep your employee headcount intact. If you want full PPP loan forgiveness, you shouldn't permit any sort of drop in your number of workforce. If it does happen, you most probably won't be able to meet the 60% threshold required for payroll expenses.

The loan forgiveness application asks for full details of your total employee expenses. The CARES Act analyses your average full-time equivalent (FTE) of employees during the 24 weeks. You can allot a 1.0 to every full-time and a 0.5 to every part-time employee. The SBA will deduct your loan forgiveness depending on your cut down on employee spending.

Try to keep this cut down to a minimum and recover it entirely to ensure that you qualify for loan forgiveness. If your FTE lowered between February 15th, 2020, and April 26th, 2020, you have time till December 31st, 2020, to qualify for the FTE Reduction Safe Harbor.

If, for some reason, you're unable to recover your full employee headcount and your employees refuse to come back, don't worry. You can explain and document valid reasons while filing your loan forgiveness application.


A big chunk of a PPP loan is meant to allow small business owners to keep their employees' pay intact. To get your forgiveness application approved, you cannot reduce more than 25% of the salaries. If there's a wage cut of above 25%, your loan forgiveness will be deducted by the same percentage as well.

The payroll expenses will fall short of your required margin, and you'll probably lose a few employees as well. If you have implemented a pay cut of more than 25%, make sure you offer the best compensation and incentives. This applies to employers who earned $33,333 from March to June or those who earned $100,000 annually in 2019.


Consult the team at Hall Accounting Company if you are having trouble keeping track of everything. They offer a low cost monthly package that your team can sign up for to help you going forward. Make sure you have all forms, receipts, bills, etc., documented and stored safely. Document yourself applying for the PPP loan program, getting a loan approved, getting your disbursements, the use of your loan money, and all other important details.

These 24 weeks need to have though evidence of your abilities to prove that you have used those bucks in the best ways possible. All your rent payments, tax filings, bill payments, accrued interests, workforce payments, and other payroll and non-payroll expenses should be crystal clear. Keep your records organized and sorted.


Often, it pays to bring in an outsider who can provide objective advice for you and your business. When you hire Hall Accounting Company, they can look at your business’s finances in a neutral way and let you know how you should handle matters.

Because they don’t have a dog in the fight, so to speak, they’re less likely to let emotion get in the way. They’ll be able to give you sound guidance, help you to see the big picture, and help you make decisions that are good for your business now and in the future.

If you have any questions, please feel free to reach out to the team at Hall Accounting Company. They can be reached by emailing or by visiting their website at


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