Knowledge Exchange

PPP Loan Forgiveness FAQs

The responses to the following Frequently Asked Questions are based on Farm Credit East's reading and interpretation of the Paycheck Protection Program rules and policies as of June 15, 2020. However, the US Small Business Administration will be the final determinant of what can be forgiven. While this information is presented in good faith, it is provided as general guidance without warranty.

New The SBA and Treasury released a PPP policy update on August 04 with additional guidance. View their PDF of FAQs for loan forgiveness

Either scroll through the full list of questions, search for a key term using Ctrl+F (pictured), or click a link below to navigate to frequently asked questions on the following topics:



Q: When is the application deadline for new PPP loans?

The deadline for new PPP loan applications was extended to August 8, 2020. SBA is no longer accepting new PPP loan applications.

Q:Has the 8-week deadline to spend the PPP funds been extended?

Yes. As a result of the Paycheck Protection Program Flexibility Act of 2020, borrowers now have 24 weeks to spend loan proceeds (or until December 31, 2020, whichever comes first) and still receive forgiveness, increased from the previous 8- week period. However, recipients who received PPP loans prior to June 5, 2020, may still use the 8-week period following the origination date of their loan for the calculation of forgiveness, if they choose. 

Note the FAQs are drafted based on seeking reimbursement for an 8-week covered period as additional guidance is needed to confirm calculations for borrowers who choose to use the new 24-week covered period, which is noted in the answers below.

Q: Is the period the date of the loan or the date the money is deposited into my account?

The covered period begins the day you receive the PPP funds.

Q: If I have more than one application, do I have to use the same covered period for all?

If you own more than one company and each company received a PPP loan, then each company will start its covered period on the day it received its PPP funds. This may be the same or different depending on your bank’s funding schedule.



Q: Do self-rentals count regarding rent?

Rent paid to a related party (including business entities with common ownership) may be counted for PPP loan forgiveness, within certain guidelines. The amount requested for loan forgiveness may not exceed the amount of mortgage interest owned by the landowner. The mortgage on the property and the lease agreement must have been in place prior to February 15, 2020. Copies of the written lease agreement and loan agreement on the property must be submitted with the PPP loan forgiveness application. This means that if a property rented from a related party is not mortgaged, then the rent does not count towards PPP loan forgiveness. 

Q: Most land rents are finalized with a “handshake.” Should we draw up a formal agreement?

If the written agreement was not in place before February 15, 2020, this rent expense does not count toward forgiveness.

Q: What portion of the rent is forgiven if we don't reach the 60% in payroll (or 75% if we choose to use the original SBA rules for forgiveness under an 8-week covered period)?

This depends entirely on how much you DO spend on payroll. For example, if you received $100,000 in PPP funds and you only spend $50,000 on payroll, the maximum loan amount you can have forgiven is $83,333 ($50,000 in payroll ÷ 0.60). This means up to $33,333 in eligible rent (or other eligible, non-payroll) expenses could be forgiven.

Q: How do we document the amount of rent we pay?

The documentation for rent will be the executed lease / rental agreement that was in place before February 15, 2020, along with canceled checks and receipts (or an account statement from your landlord). However, documentation is a separate question than what amounts qualify for loan forgiveness.  The maximum non-payroll expenses you will be able to request forgiveness for is 40% of your loan amount, assuming that you spend 60% of the loan amount on payroll. If you do not spend 60% on payroll (75% if using an 8-week covered period), your forgiveness for non-payroll expenses will be limited to 40% of the amount spent on payroll. -Also, remember that only the amount paid or incurred during the covered period counts. If your rent is paid once per year, and that due date is not during your covered period, you can allocate 8/52 of the annual rent to your PPP loan forgiveness. 

Note that additional guidance is needed on how rent allocation would apply for a 24-week covered period. 

Q: Are rent payments made in January eligible for forgiveness?

Payments made in January 2020 are not eligible as they were made before the program began. Annual payments that will be due in January 2021 can be allocated to the part that was incurred in your covered period (8/52 of the amount) and be documented toward forgiveness. Keep in mind you will have to pay these amounts on or before they are due before you apply for forgiveness so that you can document they have been paid.

Note that additional guidance is needed on how rent allocation would apply for a 24-week covered period. 


Q: What is the minimum amount that must be spent on payroll?

Under the PPP Flexibility Act, borrowers must spend at least 60% of their loan proceeds on payroll for loan forgiveness. If the borrower spends less than 60% on payroll, their PPP loan forgiveness will be reduced. The amount of loan forgiveness attributed to non-payroll costs may not exceed 40%. If the borrower elects to use the original 8-week covered period for loan forgiveness, 75% must be spent on payroll. 

Q: What if I spend more than 60% of my loan amount on payroll costs?

Fantastic! The more PPP (Paycheck Protection Program) funds you spend on payroll, the better. Go for 100% if you can.

Q: State tax can be accrued or paid? Cash vs accrual?

Same as with other payroll costs:

  • paid during covered period (or Alternative Payroll Covered Period (APCP) if that’s the period you choose for payroll) – cash
  • incurred during covered period (or APCP) AND paid by regular due date – accrual

Counting these may delay forgiveness applications depending on the payment schedule as the payment will need to be documented.

Q: Does incurred but not paid apply to payroll as well as other allowable non-payroll expenses?

For payroll, the amounts incurred but not paid inside the covered period will still count toward forgiveness IF you pay that pay run on the normally scheduled pay date. You will need to allocate and document the portion of the pay run that was incurred within the covered period.

ProTip: Use the Alternative Payroll Covered Period and this becomes much easier! You will likely have a pay run fully incurred during the alternative covered period but paid after. It counts if it is paid on the regularly scheduled pay date without all the extra allocation.

For utility, interest, and rent expenses that were incurred but not paid during the covered period, you must:

  • Have written agreements in place before February 15, 2020
  • Allocate the portion of the bills that were incurred during the covered period (there is no alternative covered period for these expenses)
  • Pay these incurred bills on or before their regularly scheduled due date
  • You will need to have paid these bills before you apply for forgiveness so that you can document the payment

Q: Which state and local payroll taxes can be included as payroll costs eligible for forgiveness?

The state and local payroll taxes charged depends on the state and locality. That depends on the state and locality.

In most states, employERs pay unemployment to the state. (Agricultural employers may or may not be subject to unemployment.) Other examples of state and local taxes are:

  • Near New York City - MTA tax
  • Massachusetts has Fair Share and Workforce Training Fund
  • New Jersey – employER share of DI, WF

Do not include employee state income tax withholdings. These are income taxes, not payroll taxes. Further, any withholdings from an employee’s paycheck are withholdings from their gross pay. You are already counting them in wages/salaries (aka gross pay).

Q: What about 401(k) contributions (from the employer), that are made once per year to the employee’s account?

This specific scenario is not explicitly addressed in the existing guidance. However, it is likely that the proportion of the employer’s contribution to the 401-K account that can be attributed to the Covered Period (or APCP) could be used. Remember, that expenses incurred must be paid on or before the next “due date,” and you must provide documentation of the expense. Owners may not accelerate payment of retirement contributions in order to have them fall within the covered period, if they normally would have occurred outside of the covered period.

So, if you wait until December to make your elective contribution, then you will not be able to apply for forgiveness until then. However, if you make an early elective contribution for ONLY the proportionate share of the Covered Period (or APCP), you should be able to count that contribution as an eligible payroll expense.

Q: If an employer is making a 2019 retirement contribution in arrears during this time period, can any of that be included in forgiveness?

If the payment was paid during the covered period, and in compliance with IRS rules for the timing of when an employer can contribute to the plan, then it should be eligible for forgiveness. This should also be in the usual course of business, and typical timing for your operation.

Q: Can worker’s compensation insurance expense be included in payroll?

No. worker’s compensation is an insurance expense, not a tax.

Q: Is there any way to include payments to freelancers (independent contractors, custom operators, etc.), other than to employ them as W-2 employees?

No. The CARES Act suggested that payments to 1099 contractors were eligible for PPP funds, however, this was changed with the Interim Final Rule published by the SBA, and they are not, in fact, eligible. Only compensation to actual employees counts.

Q: Does shares of income paid to crew as compensation on a fishing vessel count for PPP loan forgiveness, even though it is documented through a 1099?

Yes. This is the one exception to the 1099 rule. Owners of fishing vessels were able to receive PPP loans based on the amount of compensation paid to crew members using box 5 of the 1099 – MISC issued in 2019. However, if any crew members have obtained PPP loans independently based on their own self-employment earnings, that fishing vessel will not obtain forgiveness on the amounts paid to those crew members whom have their own PPP loans. 

Q: Is the pay rate used for the wage or salary reduction calculation the base rate of pay, or does it include overtime, bonuses, commissions, etc.?

The pay rate is the actual average rate of pay the employee received during the reference period, regardless of the breakdown of how it was determined. The guidance does not mention overtime pay, but refers to average rate of pay, which would imply that overtime pay would be included in the average.

Q: What about payment for unused vacation time? Can that be counted for forgiveness?

Payments for leave (vacation, sick, etc.) is considered payroll costs for purposes of the PPP loan program (both eligibility and forgiveness).

Q: An employee is going to work more at the end of June. Should we pay that employee a couple weeks early?

No, you cannot prepay employees (and expect them to work for less or for free later on). You CAN pay them now regardless of how many hours they are working.  Remember, the PPP loan funds are meant to replace unemployment, so there is no requirement that an employee be working all of the hours for which they are paid.

Q: An employee is going to work more at the end of June. Should we start them sooner?

The work on a farm is never done! Since you potentially have a forgivable loan from the government to get work done on the farm, why not bring that employee back sooner so you can get the work done sooner?

Q: Migrant workers do not show up to work every day and/or they move to other farms daily. How do I handle these?

All U.S. resident employees count the same way. For each employee, you count the total the dollars paid and hours worked on your farm during the covered period and your chosen reference period.

Q: Can I increase the hours or rate of pay of my employees (or give bonuses to them) and have that eligible for forgiveness? What about owners? (and is it OK to reduce their pay after the reference period?)

This is a three-part question, so we'll answer in three parts:

  1. Employees: Yes! You certainly may increase the rate of pay and/or issue bonuses to employees during your covered period. Realize, however, that if you pay the employee more than the equivalent of what would be a $100,000 / year salary / wages during any given pay period ($1,923 / week, $3,846 / two weeks, etc.), the excess will not count towards forgiveness. Total compensation to any employee is capped at $15,385 for an 8-week covered period.
  2. Owners: It depends on your entity structure and which covered period that you elect. The table below summarizes the treatment. For all options, owner forgiveness is based on 2019.
    Note on Corporations: owners with less than 5% ownership in the corporation are treated as employees of the corporation and are not subject to the owner compensation rules above with respect to PPP loan forgiveness.

  3. Your forgiveness will not be affected by any changes to rate of pay, hours, etc. after the completion of the covered period (or alternate payroll covered period, if applicable).

Q: My loan was funded in the middle of a pay period. Can I include the full amount of the paychecks I issued at the beginning of my covered period?

Yes, as long as the paychecks were issued within the covered period, you can count their full value, even if the pay period began before your loan was funded. Your final pay period in the covered period, however, must be allocated according to include only the payroll expenses incurred during the covered period.

Q: Are payroll expenses gross or net?

Eligible payroll expenses include:

-Gross wages
-The employER’s share of

  • State and local payroll taxes
  • Retirement contributions
  • Health care including insurance

Do not include:

  • Withholdings: they are already included in gross wages above
  • Worker’s compensation: it is insurance, not a payroll tax
  • Social Security, Medicare, FUTA: these are federal payroll taxes

Q: The federal withholding will be paid outside the period. How do I figure the eligible amounts?

Withholdings are not eligible for forgiveness. The amounts withheld from an employee’s pay are already included in gross wages, so you are all set by documenting gross wages.

Q: How can I document gross wages paid to each employee?

If you have a third-party payroll provider, they can provide these reports easily. If you prepare payroll in house, you will need to document gross wages with payroll tax filings, canceled checks and bank statements.

Q: The maximum of $15,385 per employee over 8 weeks - does this include health insurance or is it $15,385 payroll AND cost of health insurance?

This limitation is for cash compensation. This does not include the employER share of health insurance or retirement expenses, however it DOES include the employEE share as that is included in gross wages, which is the basis for determining cash compensation. This maximum applies per owner and per partner. Keep in mind that a sole proprietorship has only ONE owner, even if that owner is married. 

The maximum amount of forgiveness for employee cash compensation for the 24-week covered period is $46,154. 

Q: For the $15,385 limit per employee for 8 weeks ($46,154 for 24 weeks), any wages paid in excess of that amount is not forgiven?

Correct. You can still pay more than that, but the forgiveness for that employee (or owner), will be capped at $15,385. 

Q: Can our salaried employees receive a bonus?

Always! The maximum per employee that counts towards forgiveness is $15,385 for the 8-week covered period or $46,154 for the 24-week covered period (or APCP if chosen).

Q: If an employee has more than one job and their aggregate wages exceed $15,385 during the period ($46,154 for 24 weeks), will that limit forgiveness?

No, as long as their other job is with a different employer. Only the wages you pay them will be considered.

Q: Is the forgiveness for Owner Distribution for an LLC Partnership still limited to $15,385 over 8 weeks ($46,154 for 24 weeks)?

Owner distributions do not count toward forgiveness. For a partnership LLC, refer to Box 14A of your 2019 K-1 that you submitted with your PPP loan application. The amount eligible for forgiveness is 8/52 of the amount on box 14A if using an 8-week covered period or 2.5/12 if using a 24-week covered period. 

Q: If we pay some employees on a lag time, can we apply for reimbursement for work done during the covered period even if it is paid on the following pay period?

If, by ‘lag time,’ you mean your pay week runs from Sunday to Saturday and then you cut the paychecks on the next Friday, this is common practice.  You may count payroll incurred during the covered period as long as it is paid on the next regularly scheduled pay date.

Q: When partners have uneven allocations of earnings from self-employment, are the box 14As netted?

The math for each owner’s compensation is handled separately. For partners with negative earnings in Box 14A of their 2019 K-1, there were no earnings included in the loan eligibility calculation and there are no earnings eligible for forgiveness. For partners with positive earnings in Box 14A of their 2019 K-1, their earnings were included in the loan eligibility calculation (at a maximum of $100,000) and their earnings are eligible for forgiveness (capped at $100,000/52x8 = $15,385 for those using the 8-week covered period, and $100,000 / 52 x 2.5 if using the 24 week covered period).

Q: When I applied, there was no place to provide K-1 or schedule F information with my payroll.  In the FAQs, the lender specifically said you can’t include K-1 information in payroll. Can I submit a K-1 as proof of payroll?

No. Payroll is payroll – wages and salaries reported on W-2s. K-1s are treated separately and SBA did not issue guidance on how to handle partner’s income from self-employment until much later than other guidance. Many banks did not include partnership income in the early rounds of applications because SBA had not addressed that they were acceptable. If your loan eligibility was based on payroll, then you’ll provide your payroll reports as documentation for how the money was spent when you apply for forgiveness.

Q: What line on a Schedule F form do I use to determine my income as a sole proprietor?

Schedule F: Line 34, Net Farm Profit (or loss)
Schedule C: Line 31, Net profit (or loss)

Q: How do owner draws need to be documented?

“Owner Draws” are not eligible for forgiveness. (See answer to 'Earnings from self-employment' above)

Documentation of owner’s earnings eligible for forgiveness is determined by the owner’s business structure:

  • For sole proprietorships (and single member LLC’s taxed as a sole prop.): Your 2019 Schedule F or Schedule C
  • For Partnerships (and multi-member LLC’s taxed as partnerships): Schedule K-1 from the 2019 Form 1065 tax return for the partnership
  • For Corporations (and LLC’s taxed as a corporation): Your owner compensation paid in 2019. Note that this does not include shareholder distributions / dividends. 

Q: If you had a loss in 2019, you cannot get any forgiveness for an owner’s draw?

Owners’ draws do not count toward forgiveness. Profit from a sole proprietorship as determined on your 2019 Schedule F or C is what determined your loan eligibility and will determine your loan forgiveness. See how to calculate owner’s compensation forgiveness. 

Q: How does it work with seasonal employees? Do the employees have to be the same individuals?

No. For the purposes of the employee count (FTEs), you just have to have maintain the same number of FTEs. The individuals do not have to be the same people. However, for purposes of the wage / salary reduction test, the test is applied to each individual employee on a case-by-case basis.

Q: An employee asked to reduce work hours from a 40-hour work week to 35 hours, and then asked for another reduction in hours due to the physical demand of the job and personal reasons. This employee's hours were then picked up by another employee which totaled over 50 hours per week. Can the employee who asked for reduced hours still be counted as a 1 FTE because of causes beyond our control?

If you have written documentation that this employee voluntarily reduced her own hours, then the employee will be counted at the same FTE rate they were working during your reference period. If they were at 40 hours during your chosen reference period, they will count as one FTE during your covered period (or APCP if chosen). If they were at 35 hours during your chosen reference period, they will count as 0.88 FTE during your covered period (or APCP if chosen).

If you do not have the hour reduction in writing, you will need to count the employee based on the hours worked during your covered period (APCP if chosen).

The employee who picked up the hours will count for a maximum of 1 FTE, even though that employee is working overtime.

Q: Do all salaried employees count as an FTE, even if they don’t work 40 hours per week during the covered period?

There is no specific mention of treating salaried employees differently than hourly wage employees in the SBA guidance for counting of FTE’s. If you track hours for salaried employees, you should use the hours for which you paid the employee. For example, if the work arrangement for a salaried employee is that they are expected to work 30 hours per week, that employee would be counted as 0.75 FTE.

The SBA allows for an alternative method for calculating FTE’s that does not require you to document hours paid. This simplified method allows the borrower to assign 0.5 FTE’s to each part time employee, and 1.0 to each full-time employee. If this method is elected, it must be used for all employees.

Q: Our FTE employees work 32 to 36 hours per week. How will this affect the calculations?

32/40 = 0.8 FTE and 36/40 = 0.9 FTE – but you need to average all an employee’s hours during the reference periods, as instructed. The test is that you maintained FTEs, so you will compare your reference period to your covered period and show the math to support if you maintained (or reduced) the same level of FTEs. 

Q: What about employees who are furloughed / laid off / reduced hours?

Your loan forgiveness will be decreased if you do not restore your number of FTEs and employees to their full rate of pay by December 31, 2020 (changed from June 30 by the Paycheck Protection Program Flexibility Act of 2020). This limitation does not apply if an eligible recipient, in good faith, is able to document an inability to rehire individuals who were employees on February 15, 2020, and an inability to hire similarly qualified employees for unfilled positions on or before December 31, 2020, OR, is able to document an inability to return to the same level of business activity as prior to February 15, 2020, due to compliance with COVID-19 restrictions.

Q: What is the date range for the comparison period for changes in FTE and wages?

First, choose whether you’re using your Covered Period (CP) or Alternative Payroll Covered Period (APCP).

Then, for wages, you compare your CP (or APCP, if chosen) to:
January 1, 2020 - March 31, 2020
The pay period including February 15, 2020
February 15, 2020 - April 26, 2020
The pay period including June 30, 2020.

For FTEs, you compare your Covered Period (or APCP if chosen) to:
January 1 - February 29, 2020
February 15 - June 30, 2019
OR (for those who applied as a Seasonal Employer ONLY)
Any 12 consecutive weeks between May 1 and September 15, 2019

For the FTE reduction Safe Harbor, if you reduced your number of average FTE’s during the time period of February 15, 2020 – April 26, 2020 AND you restore the number of FTE’s by the pay period including December 31, 2020 to the FTE’s during the pay period that included February 15, 2020, you will not be subject to the FTE forgiveness reduction factor.

Q: If using the APCP, is the 56-day (168 day for 24-week covered period) window “reset” to match the APCP 56-day window for payroll?

If you choose the APCP instead of the covered period, the APCP of 8 / 24 weeks begins the first day of your first pay period after receiving the PPP funds. Here's an example:

  • Receive PPP funds May 15
  • Pay week is Sunday through Saturday
  • APCP begins May 17 (The APCP applies to PAYROLL ONLY, the other expenses must follow the covered period beginning the date you received your PPP funds.)

Q: What if employees decline to return when called from a layoff, or if we can’t find new employees to hire?

Document in writing the employee’s refusal or efforts to recruit new workers.

Q: If an employee did not receive $1,923 per week in the prior year, can they be given a bonus to reach that threshold?

No. The 2019 payroll year has been completed. Records cannot be adjusted to achieve a favorable result. A bonus paid now will be applied to 2020 payroll and possibly your PPP covered period if paid during the applicable timeframe.

The $1,923/week in 2019 test simply determines if that employee is subject to the wage reduction test.  If you had cut their wages, simply use your PPP funds to restore them to their original pay rate in order to avoid forgiveness reduction due to pay cuts.

Q: Can employers pay a "hazard" pay increase during the PPP covered period and is that a problem for the “safe harbor” rule?

The safe harbor applies to employees who did not receive raises between February 15 and April 26, 2020. If you issued a pay cut and then restored those employees to their pre-March 31 pay rate by December 31, a safe harbor applies, and forgiveness will not be reduced for these employees.

The safe harbor does not apply to those who raised pay (i.e. gave raises) between February 15 and April 26 AND THEN reduced pay during their covered period. These employers need to reinstate the pay levels to what they were after the February 15-April 26 raise was awarded to qualify for forgiveness.

Employers that gave hazard pay during the covered period should be clear that’s what they were doing.

If you instituted “Hazard Pay” prior to the start of the Covered Period (or APCP) and maintain that additional rate of pay throughout your Covered Period (or APCP), it will not result in a reduction of forgiveness, assuming that the pay rate for each employee including hazard pay is above the average rate of pay for each employee January 1 – March 31.

Q: How long do new hires need to be on the payroll after the covered period (or can employees pay rates or hours be changed after the covered period)?

After the end of the covered period (or APCP) employers can reduce hours, pay rates or lay off employees without any impact on PPP forgiveness. Employers can always increase hours or pay rates without penalty.

Q: Part of the state unemployment payment will be made after the covered period. How do I prorate this?

Since unemployment is incurred along with payroll, you can ask your third-party payroll provider for these reports. If you prepare payroll in house and use software, it will accrue these amounts as well.

Q: Payroll calculation example: 2019 Schedule F $84,326, W-3 wages paid $34,167. PPP loan = $24,686. Do we have to spend 60% of this on payroll? 

If your goal is to achieve maximum forgiveness, at least 60% of the PPP loan amount ($14,812 in this example) must be spent on payroll.

Q: What if as a sole proprietor, I collect unemployment during all or part of the time?

If a sole proprietor collects unemployment, PPP funds must be returned immediately.

Q: What documentation do I need for payroll expenses if I do it in-house?

If you do not have third party payroll service provider reports to use for documentation for any or all of payroll expenses, your documentation requirements will include:

  • Bank Account Statements documenting the cash compensation paid to employees
  • Tax forms for the periods that overlap with the Covered Period or Alternative Payroll Covered Period
  • State quarterly business and individual employee wage reporting and unemployment insurance tax filings reported or that will be reported to the relevant state
  • Payment receipts, cancelled checks, or account statements documenting the amount of employer contributions to employee health insurance and retirement plans

Q: If you don't use a payroll processor and just use Quickbooks and cut manual checks, what type of documentation can you produce to validate your employee payroll?

For payroll, you will be required to submit bank statements, canceled checks AND tax forms for the periods that overlap your covered period (or APCP is chosen), and state quarterly business and individual employee wage reporting and unemployment insurance tax filings.

Q: If payroll is based on when payroll is paid, we can process this week's payroll Friday and pay it before our PPP period ends on Monday. This essentially gives 9 payrolls paid in the covered period (if using the 8-week covered period). Can we do this?

You should not alter your pay period to try and count more expenses. Unless your payroll is declining at this time of year, use the alternative payroll covered period to align with your actual pay weeks.  Your last week’s incurred pay will be paid outside of the APCP, but that still counts as long as you paid it on its regularly scheduled pay date. You also get to count the one pay run that was paid the first few days of your APCP even though the hours were incurred before your APCP.  


Q: What happens if my loan is not fully forgiven?

Any amount not forgiven becomes a loan at 1% interest, payable over 2 years from the date of origination. Note that loans closed after June 5, the loans will be repayable over 5 years. Loans made before June 5 can be extended to 5 years if mutually agreed upon by borrower and lender. Funds can be paid back at any time without penalty. Interest is deferred for a period of 1 year from the date of origination. 

Q: If you didn’t include utilities and mortgage interest on your original PPP application can you still include those payments for forgiveness?

Yes. Your loan application only considered your payroll expenses and the amount you could receive under the PPP was equal to 2.5 times your average monthly payroll costs. It did not take utilities and mortgage interest into account. However, you can still claim these expenses (up to 40% of spending), for forgiveness.

Q: Can I return unspent PPP funds without penalty?

Yes. Any amount not forgiven will remain as a loan payable over 2 years at 1% interest, except for loans made after June 5, which will have a repayment period of 5 years. Funds can be paid back at any time without penalty. However, loan funds are still restricted to be used on eligible payroll, utilities, interest or rent expenses.

If forgiveness is applied for and granted, and any remaining funds are paid back before the twelve-month mark, there will likely be no out-of-pocket interest expense. 

Any interest that has accrued on the loan will be due at the time of repayment if funds are paid back. 

Q: Any modification to the 8/52 if the PPP application was based on "seasonal earnings" from 2019 with a greater percentage of earning occurring in the spring?

No. The Administrator, in consultation with the Secretary, has determined that it is appropriate to limit the forgiveness of owner compensation replacement for individuals with self-employment income who file a Schedule C or F to eight weeks’ worth (8/52) of 2019 net profit. This is most consistent with the structure of the Act and its overarching focus on keeping workers paid and will prevent windfalls that Congress did not intend.

For a 24-week covered period, owner compensation replacement is limited to 2.5 / 12. This is the same amount of owner compensation that you were eligible to claim on your PPP loan application. 

Q: How to calculate forgiveness for a single member LLC that started in November 2019?

Right now, the guidance does not make any exception for new businesses. This may come later – in fact, you want to email your regional SBA office and/or congressional representatives to request this! In the meantime, a single member LLC owner’s forgiveness would be calculated as 8/52 (2.5 /12 for the 24-week covered period) of 2019 net profit from the schedule F or C that was filed with their PPP loan application.

Q: Is the forgiveness amount decreased by the Sec. 179 deduction?

Indirectly. Earnings from self-employment are reduced by the section 179 deduction. The PPP loan eligibility and forgiveness are based on the earnings from self-employment of an owner who is a partner or a sole proprietorship.

Q: Can you address the SBA guidance statement that says partnership self-employment is reduced by Sec. 179?

Your accountant takes care of this when they complete your tax return.  Box 14A already includes any Section 179 allocated to that partner.

Q: What if we included partner draws in the calculation for the PPP loan and that exceeds the box 14A number? Can we still spend that money on eligible funds, or should we recalculate an appropriate loan amount and hold those funds to give back?

First, make note of your application date and the guidance that was available at the time. To be safe, make sure you have that amount in reserve in case you are directed to pay it back. You can always document that you spent the total amount of funds on the appropriate expenses.

Q: If we didn’t give a K-1 to apply, can we count it now towards forgiveness?

The 2019 Form 1040 Schedule C or F that was provided at the time of the PPP loan application must be used to determine the amount of net profit allocated to the owner for the eight-week covered period. SBA has further clarified that Schedule F replaces Schedule C for farmers and K-1s replace Schedule C for partners.

Q: Does the interest on all loans qualify as an eligible use of PPP funds?

To qualify, interest paid or incurred and paid on or before the next due date after the Covered Period on collateralized loans that are in the name of the business that received PPP funds. This includes mortgages, operating lines and other loans secured by real estate, equipment or other personal property.

Q: Is it the PPP lender's responsibility to supply each PPP Loan received customers the application and guidelines including date guidelines or is it the PPP loan recipient’s responsibility to apply for the forgiveness?

The borrower has taken out a loan. The borrower now has the opportunity to apply for forgiveness of that loan IF they spend the right amount of money on the right expenses in the right time period.  It is the borrower’s responsibility to understand the forgiveness rules, including deadlines, and to gather the documentation, complete the forgiveness application, and apply for forgiveness.

Q: What about a line of credit that existed prior to February 15, but where the balance was increased afterwards. Can that interest be included?

As long as the LOC existed prior to February 15, under the same promissory note, the interest paid should be eligible (not principal), even if the balance was increased later. The line of credit must be secured by real or personal property as collateral.

Q: What about leases – we have an equipment lease and the equipment is collateral on it. Is that eligible?

Leases of personal property are eligible. This includes leases of equipment, buildings, vehicles, etc.

Q: Is gas/diesel for tractors eligible?

No, this is not eligible.

Q: Can we use fuel our truck drivers fill in the trucks used for delivering our products?

No. The SBA has clarified the “transportation” costs included in eligible utility costs to include only ‘transportation utility fees assessed by state and local governments’. Therefore, fuel for vehicles is not eligible.

Q: We fill our fuel tank about 7 times per year. How do we calculate that utility expense?

Fuel for heating buildings is an eligible utility expense. You can either claim the entire cash expense of filling it during the Covered Period (regardless of if it is all used), OR pro-rate the expense of whatever fuel is used from the tank during the Covered Period. Retain your fuel invoices for documentation.

Q: Is trash removal or recycling expense (or portable toilets, farmer’s market fees, etc.) considered a “utility”?

According to the PPP guidance, utilities are:

  • Distribution of electricity
  • Gas
  • Water
  • Telephone   or
  • Internet access

for which service began before February 15, 2020.

Rubbish removal, toilets, or market fees are not included on the list of eligible utility expenses provided by SBA.

Q: What about utility bills for services that were incurred before the Covered Period but paid during the Covered Period? What about services incurred during the period but paid for after the Covered Period?

Any bills paid during the Covered Period will count as long as it is not a ‘prepayment’ of the expense. Any expenses incurred during the Covered Period and paid on or before the date due will count. This means that a bill received at the beginning of the Covered Period that may include expenses incurred prior to the Covered Period will count, however, expenses incurred AFTER the Covered Period will not. The final bill will need to be pro-rated to reflect only the expenses incurred during the Covered Period.

Q: Are cell phone bills (pagers, internet access, etc.) considered utilities?


Q: What documentation is required for utilities - a bill or would a P&L suffice?

Internal records are not acceptable documentation for forgiveness. The statement from the utility should be retained. If the statement does not show your payment, you will need to show canceled checks and invoices / receipts. If paying by credit card, retain your statements showing payment.

Q: Most banks don’t provide canceled checks or even show images on their statements. Is there any other form of substantiation?

Most banks will provide canceled checks or images on request if they don’t do so automatically in statements. If your bank doesn’t automatically provide it, ask for it. Chances are they are also a PPP lender, so you are not the only one asking for it. Canceled checks are necessary only when you cannot get a statement from the lender, landlord or utility.

Q: We use ACH (or online payments) for many of our expenses. What would be the documentation needed?

Statements or receipts from the vendor showing payment should be sufficient, and/or bank statements showing payment. The key is some kind of third-party verification of the expense and payment. 

Q: We received PPP money and EIDL money.  Do we need to factor that into our calculations?

If you took an EIDL advance, you will see SBA reduce your PPP loan forgiveness by the amount of your EIDL advance. If you applied for EIDL funds for payroll, you must refinance that portion with your PPP loan.

Q: How can I get copies of my application documents, which I submitted and my PPP loan number?

If you didn’t save a copy of your application, you can request it of your lender. Your loan number is on the promissory note you signed.

Q. How do we treat Tips earned by employees with respect to documenting eligible payroll expenses for forgiveness?

Tips are considered eligible payroll expenses for PPP loan forgiveness. The SBA Interim Final Rule on PPP Loan forgiveness says the following about tips: “…cash tips or the equivalent (based on employer records of past times, or, in the absence of such records, a reasonable, good-faith employer estimate of such tips)…”

Visit and for information on loan forgiveness. It is your obligation, as the borrower, to understand the SBA rules.

For clarification on the tables included in the forgiveness application, see the PPP Forgiveness Applications and instructions at