Yes, PPP loans (both principal and any accrued interest) are eligible to be forgiven up to 100% if you can prove that you spent 100% of the funds received on permissible users (payroll, mortgage interest, rent, or utilities) in the 8 weeks following receipt of the loan.
No more than 25% of the amount forgiven can be used on non-payroll costs during that 8 week period.
To calculate your expected forgivable amount:
1. Sum up your costs on the following expenses during the 8 week period after you received the loan:
- Payroll costs
- As with calculating your loan amount, you can count only up to $100,000 in total compensation per employee in this payroll amount
- Interest payments on mortgage obligations existing before February 15, 2020
- This cannot include any principal paid or pre-paid during this period
- Rent payments on leases existing before February 15, 2020
- Utility payments on contracts before February 15, 2020
2. If the non-payroll costs above exceed 25% of the total, then your maximum forgivable amount will be equal to payroll costs divided by 0.75. For example, if you receive a PPP loan for $100,000, then spend $60,000 on payroll in the following 8 weeks, you will be eligible to have up to $80,000 forgiven ($60,000 in payroll costs = 75%, $20,000 in non-payroll costs = 25%).
3. Your total forgivable amount will be reduced if you reduce your headcount or implement material salary reductions compared to what they were on February 15th, 2020.
If you laid-off employees, you are still eligible for forgiveness, but the total amount forgiven will be reduced proportionally to the reduction in headcount. To calculate that proportion, you will divide the average number of “full-time equivalent” employees per month during the covered period by either:
- The average monthly employees between February 15, 2019 and June 30, 2019, or
- If you are not a seasonal business, you may also compare it to the period between January 1, 2020 and February 29, 2020. Seasonal businesses must use the 2019 time period above.
If you reduced the total salary of any employee, then your forgiveness amount will be decreased by the total amount of reduced salary during the covered period (February 15, 2020 to June 30, 2020) in excess of 25% below that employee’s compensation during the most recent full quarter.
Reductions on the forgivable amount won’t occur if you hire employees back or undo the reduced wages by June 30, 2020. In short, the forgiven amount will be the same as if you never fired or reduced salary if you undo these reductions by June 30, 2020. This specifically applies to layoffs or salary reductions that occurred between February 15, 2020 and April 25, 2020.