PPP Loan Forgiveness – Answers to your Frequently Asked Questions

Please note, this blog is current to the date of its publication, Thursday, June 25. For additional updates or assistance navigating these uncertain times, please contact us or visit our SST COVID-19 resource page.


Between April and June 2020, the Paycheck Protection Program (PPP) provided $500 billion in loans to more than 4 million small businesses for financial relief in response to COVID-19. One major benefit of the program is debt forgiveness, so long as the company meets a set of requirements and applies for forgiveness through its lender.

The PPP loan forgiveness process can be overwhelming, as the Small Business Administration (SBA) continues to provide updated guidance and requirements. On June 16, SST CEO Bill Sims, CPA, and Partner Emily Cook, CPA, hosted a PPP loan forgiveness webinar to discuss the latest requirements. Below are some of the most frequently asked questions about the process and the SST team’s answers.

If you’d like assistance navigating the PPP loan forgiveness process, SST is here to help. Click here to see our PPP Loan Forgiveness services.

  1. Do payroll dates count from the date of distribution or from the pay period covered by distributions?
  2. The period starting with the date of funding is called the Covered Period. You may use an Alternative Covered Payroll Period that begins on the first day of your first payroll period beginning after your funding date. There’s an example on page 1 of the SBA’s PPP loan forgiveness instructions under Alternative Covered Payroll Period.
  3. So you can use 100% of the PPP Loan on payroll if you use 24 weeks?
  4. Yes, you may use 100% of your loan proceeds for payroll. You are not required to use the funds for non-payroll expenses, but if you do, the non-payroll expenses are limited to a maximum of 40% of your loan amount. Refer to the very bottom of page 2 of the forgiveness instructions for Eligible Nonpayroll Costs.
  5. If employees quit and payroll is lowered during the Covered Period, will that loss in payroll affect the loan forgiveness?
  6. The voluntary resignation of an employee is considered an FTE reduction exception and will not reduce the loan forgiveness. Refer to page 5 of the forgiveness instructions for FTE Reduction Exceptions.
  7. I have an open position after an employee decided to relocate. I will eventually fill this position, but I have not as of the end of my covered period. Am I allowed to count them as a full FTE during my covered period?
  8. The voluntary resignation of an employee is considered an FTE reduction exception and will not reduce the loan forgiveness. Refer to page 5 of the forgiveness instructions for FTE Reduction Exceptions.
  9. Is there a time frame during which a voluntary resignation must be filled?
  10. Since the voluntary resignation meets the definition of an exception, you are not required to fill the position.
  11. Are owner-employees counted as FTEs for forgiveness purposes when comparing the baseline period with the covered period?
  12. Yes, there is no exclusion of owner-employees from the calculation for FTEs.
  13. What is the established threshold for an “owner-employee?” For example, is a 2% interest holder an “owner-employee?”
  14. The interim final rule (IFR) does not provide a definition of owner-employee. It does state there is a cap on the amount of loan forgiveness available:

“…the amount of loan forgiveness requested for owner-employees and self-employed individuals’ payroll compensation can be no more than the lesser of 8/52 of 2019 compensation (i.e., approximately 15.38% of 2019 compensation) or $15,385 per individual in total across all businesses.”

  1. As a day school, our teachers are seasonal workers on a 9-month contract. They do not work in June, July and August, so they will not be paid during those months. Is there an exception that allows for seasonal workers?
  2. The comparison to be made is your FTEs during your Covered Period (or Alternative Covered Payroll Period) and your Reference Period. The Reference Period is typically your choice of either 1) February 15, 2019, through June 30, 2019, or 2) January 1, 2020, through February 29, 2020. However, seasonal employers, such as schools, may choose a Reference Period of any consecutive 12-weeks from May 1, 2019, through September 15, 2019. Refer to Line 11 on page 3 of the forgiveness instructions.
  3. If the FTE count used on the original application was incorrect, can it be corrected with the lender?
  4. There is no reference back to your original application in the loan forgiveness process. The number of employees shown on the original application was for information purposes. The loan forgiveness application will contain your correct information for both the Reference Period and Covered Period.
  5. What about the de-facto safe harbor contained in the paragraph between Lines 10 and 11 on PPP Schedule A?
  6. If your organization did not furlough any employees or reduce hours worked by employees, you do not have to worry about the FTE reduction. You can go straight to Line 13 and enter 1.0.
  7. What is the amount that can be forgiven? How does one reconcile EIDL, PPP and other SBA loans?
  8. The amount of the PPP that may be forgiven is 100% of the loan amount. Some small businesses also applied for the EIDL grant, which allowed for $1,000 per employee up to a maximum of $10,000. If you received an EIDL grant, the SBA will deduct that amount from the PPP forgiveness. Refer to Line 11 on Page 2 of the forgiveness instructions.
  9. When is the loan forgiveness application due?
  10. Applications for PPP loan forgiveness are due within 10 months after the last day of your Covered Period. The Covered Period began on the date you received your PPP funds. The period ended (or will end) after 8 weeks or 24 weeks. If you received your funds prior to June 5, 2020, you may elect the 8-week period or the 24-week period. If you received your funds after June 5, 2020, you must use the 24-week period. Refer to Page 1 of the forgiveness instructions for the Covered Period.

These answers are valid as of today, but the PPP loan forgiveness information is ever-changing. SST’s COVID-19 resource page is being updated often. Please check it periodically for the latest information, or contact us today for guidance.

Thanks to SST CAAS Manager Simeon May, CPA, CAE, CCA, for providing the content for this blog post. Click here to learn more about Simeon.