How is a PPP Loan Calculated?

A PPP loan is calculated by taking the average monthly payroll costs from the last 12 months and multiplying it by 2.5.

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PPP Loan Basics

The Paycheck Protection Program (PPP) loan is a loan that is 100% federally guaranteed. The loan is provided by an eligible lender and backed by the Small Business Administration (SBA). The PPP loan is intended to help small businesses keep their workers employed during the COVID-19 pandemic.

What is a PPP Loan?

A PPP loan is a loan guaranteed by the Small Business Administration (SBA) that is used to help small businesses and nonprofits keep their workers employed during the COVID-19 pandemic.

PPP loans are 100% forgiven if you use the loan proceeds for eligible payroll costs, mortgage interest, rent, and utility expenses over the course of 24 weeks. If you do not use the loan for these purposes, or if you do not use all of the loan for these purposes, you will be responsible for repaying the loan with interest.

The maximum amount of a PPP loan is 2.5 times your average monthly payroll costs, up to \$10 million.

How is a PPP Loan Calculated?

The amount of your PPP loan is based on your average monthly payroll costs from the last 12 months, or the 2019 calendar year. Your maximum loan amount is 2.5 times your average monthly payroll costs.

For example, if your average monthly payroll cost is \$100,000, your maximum loan amount would be \$250,000.

To calculate your average monthly payroll costs:

-Divide that number by 12 to get your average monthly payroll cost

PPP Loan Amount

What is the maximum loan amount?

The amount of the loan is based on your average monthly payroll costs from the last year, up to \$100,000 per employee.

For example, if your business has 10 employees and your monthly payroll costs are \$50,000 per month, your loan amount would be \$500,000.

To calculate your maximum loan amount, multiply your average monthly payroll costs by 2.5.

How is the loan amount calculated?

The loan amount is calculated based on your average monthly payroll costs from the last 12 months.

For most businesses, the maximum loan amount is 2.5 times their average monthly payroll costs from the last 12 months. So if your business’s average monthly payroll expenses were \$100,000, you could receive a loan for up to \$250,000.

If you’re a seasonal employer or your business was not in operation for the entire 12 months before the loan is made, your loan amount will be calculated based on your average monthly payroll for the time period you were in operation.

PPP Loan Forgiveness

The amount that will be forgiven on your PPP loan is the lesser of either the total amount of costs incurred during the covered period or 8 weeks’ worth of your 2019 average payroll costs.

What is loan forgiveness?

Loan forgiveness is when a lender cancels all or part of a borrower’s debt. Loan forgiveness may occur when the borrower:

-Pays off the loan in full
-Makes all required payments on time for a certain period of time, such as five years
-Meets other requirements set by the lender, such as working for a certain employer or using the loan for a specific purpose

What is a PPP loan?
A PPP loan is a loan given by the government to small businesses and individuals in order to help them pay their employees and maintain their businesses during the COVID-19 pandemic. The loans are 100% forgivable if used for their intended purposes.

How is loan forgiveness calculated?

The SBA has released a loan forgiveness application that provides guidance on how PPP loans will be forgiven.

Borrowers will have to submit documentation supporting their loan forgiveness request, including payroll records, mortgage interest payments, rent payments, and utility bills. The SBA will then have up to 90 days to review the application and issue a decision.

Loan forgiveness will be based on the eligible costs incurred and paid during the covered period. Eligible costs include payroll costs, mortgage interest payments, rent payments, and utility bills. To receive full loan forgiveness, at least 60% of the loan must be used for payroll costs.

Borrowers can also choose to extend their covered period from 8 weeks to 24 weeks. This will give them more time to incur and pay for eligible costs. However, it is important to note that the amount of loan forgiveness will be pro-rated based on the longer covered period.

For example, if a borrower has a \$100,000 loan and they extend their covered period from 8 weeks to 24 weeks, they can use \$100,000 of the loan for eligible costs over the 24 week period. However, the amount of loan forgiveness they are eligible for will be reduced because they are using the same amount of money over a longer period of time.

PPP Loan Repayment

What is the loan repayment term?

The PPP has a 1% fixed interest rate and the repayment term is two years. You will have a six-month grace period before payments are due.

How is the loan repayment calculated?

The PPP loan repayment is calculated based on the size of the loan, the interest rate, and the length of the loan. The interest rate is typically fixed, but may be variable depending on the lender. The repayment period is typically two years, but may be shorter or longer depending on the terms of the loan.