You Have Your PPP Money, Now What?

April 20, 2020 | by Kevin J. Gienger, CPA

This article has been updated by guidance issued May 15, 2020.  For a detailed dive into the Loan Forgiveness Application please see click here.


If you were lucky enough to get in the right line, getting the loan was relatively easy. Now that you have the money the hard work begins.  Getting your entire loan forgiven will take homework, planning and detail tracking over your eight-week spending time.

Your Paycheck Protection Loan amount is based on 2.5 months of average payroll costs.  You only have eight weeks to use the money on designated expenses.  This eight-week period will determine how much of the loan you do not have to pay back.  You need to do homework and planning to maximize the amount of the loan that is forgiven.

Please, remember the SBA is still giving guidance.  We don’t know all the details yet.  Please see our Detailed Loan Forgiveness article for more updated details.

If you have already been funded, you need to move quickly.  But, even if you haven’t been approved or received your money you will want to begin gathering the following information, to plan.  Start with some homework to determine your base line FTE.  You will need this to measure your potential forgiveness.


FTE Measurement:

First, you need to know the hours worked for all your employees paid from February 15, 2019 to June 30, 2019.  You also need this same data for payrolls during January 1, 2020 to March 31, 2020.  You get to choose which one of these two periods to use, and it will be the base line to determine your Full Time Equivalent (FTE) employee count.

Employees who worked more than 40 hours a week will be counted as one FTE.  For part time employees (those who worked less than 40 hours per week), you will average their hours worked per week and then divide that number by 40 hours to determine the number of FTE’s for part time employees.  While a reduction of FTE’s during the 8-week period may reduce your forgiveness, you can rehire those people prior to June 30, 2020 and potentially avoid this part of the reduction.  The details on this restoration are not clear yet.

See our updated article for the Simplified FTE Calculation.


Payroll Measurement

Second you need to determine the amount of wages paid to each employee during the first quarter from January 1, 2020 to March 31, 2020.  You can ignore any employee that made more than $100k at any point in 2019.

The day you receive the first dollar of PPP loan money your eight-week measurement period begins.  On that day you now need to begin planning so you can determine what expenses you must maximize the amount of loan forgiven.  The forgiveness process is multi-layered.

See our updated article for more details on Payroll Reduction impacts.


Limitations on Loan Forgiveness

Not all expense will be allowed to be counted toward loan forgiveness.  The following amounts are not part of payroll costs:

  1. Wages paid in excess $15,385 to any employee or owner during the 8-week period.
  2. Social security and Medicare taxes paid by the employer.
  3. Sick leave paid to employees in which you qualified for a tax credit against payroll taxes under the Families First Coronavirus Response Act.

Forgiveness will also be reduced by other tests. Please see our updated article for details on how to calculate these potential reductions.

Other payroll costs that can be include in forgiveness:

  • State and local employer paid employment taxes like state unemployment.
  • Employer paid Health Insurance
  • Employer paid Retirement Contributions


Limitation of Non-payroll Costs

You can also use your loan proceeds to pay for:

  • Mortgage Interest (for obligations you entered prior to February 15, 2020)
  • Rent for both real and personal property (for leases in place prior to February 15, 2020)
  • Utilities (electricity, gas, water, transportation, telephone or internet)

However, of the total amount of money you request to be forgiven these non-payroll costs cannot exceed 25 percent.

I realize there is not simple example and every situation will have its own complexities.  You will need the help of your CPA to maximize the amount of loan forgiven.  You need to plan before you get your money.


What control do you have over what is forgiven?

If you have reduced your work force or the hours for your people you can hire them back as soon as you get your loan proceeds.  You can also increase hours or pay people full time hours even if they don’t have full time work.  Consider awarding extra pay or bonuses for people that have worked though this difficult time.  Remember any wages over $15,385 in the eight weeks will not be part of your forgiveness.  Additionally, consider additional retirement contributions for workers who are still working.  This loan is designed to help you pay and retain workers.   Just make sure you clearly communicate and document any extra pay or retirement benefits you offer your people.

In order to have your loan forgiven you need to submit a request to your bank.  Each bank will likely handle this process differently.  Remember, it is your responsibly as the borrower to request forgiveness and provide the documentation to support your spending.

Please see our updated article for a detail list of documentation you need.


With proper homework, planning and tracking you will not have pay back your PPP loan.  Any amount that is not forgiven will be amortized over two years.  Interest will accrue but no payments will be due until six months after your loan is funded.


Please give us a call to help you plan the proper use of your loan proceeds and maximize the amount of loan you don’t have to pay back.