April 2020 – PPP Loan Forgiveness Memo

The loan will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities

— At least 75% of the forgiven amount must have been used for payroll. The term “payroll costs” shall not include the compensation of an individual employee in excess of $33,333 during the covered period.

Reduction of headcount and salary will cause the reduction of the loan forgiven amount.

–If there’s a reduction in staff, loan forgiveness will be reduced by the percentage reduction in FTE (full time employees) over the eight-week period after the loan is received.

To calculate the amount, the average FTE over the eight-week period is divided by the lesser of the following periods below:
• Average FTE per month between February 15, 2019, and June 30,2019
• Average FTE per month between January 1, 2020, and February 29, 2020

• There are additional provisions relating to the determination of FTEs. In particular, there’s a special exclusion under the CARES Act when it comes to rehiring.
• A borrower that reduced or plans to reduce the number of full-time employees on its payroll between February 15, 2020, and 30 days after the PPP’s enactment can re-hire those employees prior to June 30, 2020, and could receive the benefit of the pre-reduction FTE count on its loan forgiveness calculation.

–Reduction Relating to Compensation — The amount of loan forgiveness under this section shall also be reduced by the amount of any reduction in excess of 25 percent of compensation in the most recent full quarter in which the employee was paid in compensation during the covered period of any employee who was compensated—

• (A) in an amount less than $33,333 during the period beginning on March 1, 2019 and ending on June 30, 2019; or
• (B) not more than $100,000 on annualized basis during 2019.

Non-Payroll Costs

No more than 25% of the MAFA may be for non-payroll costs.

Non-payroll costs include:

• Interest on the mortgage obligation incurred in the ordinary course of business (principal excluded) with origination prior to February 15, 2020
• Rent on written lease agreements with terms beginning prior to February 15, 2020
• Payments on utilities (electricity, gas, water, transportation, telephone, or internet) with service started prior to February 15, 2020


The application for forgiveness is due within 90 days of the expiration of the eight-week post-funding period. Then the approval process is expected to be completed within 60 days of the application. (Time frame may vary by bank/lender. Always check with the lenders.)