PPP Loan Forgiveness FAQs for Small Businesses

If you spend 100% of the funds on payroll, mortgage interest, rent, and utilities in the eight weeks after receiving the loan, lenders will forgive your PPP loan. You can also use your loan to cover existing debt obligations, such as credit card payments, but you will not receive loan forgiveness on those costs.

What are all acceptable uses of the PPP funds for businesses?

Payroll costs, health care benefits, mortgage interest payments, rent, utility, interest payments on debt incurred prior to February 15, 2020, and/or refinancing an SBA EIDL loan made between January 31, 2020 and April 3, 2020.

What is included in utilities?

The CARES Act defines utilities in Sec.1106(a)(5) as electricity, gas, water, transportation, telephone or internet access for service which began prior to February 15, 2020. Further guidance released added gas used when driving a business vehicle. Other common utilities such as garbage collection or security monitoring may also be classified as a utility, but a business should confirm with the lending institution.

When determining the potential reduction of loan forgiveness due to workforce reductions, what method is used to determine employees?

The CARES Act uses the standard of “full-time equivalent employees” to determine whether loan forgiveness must be reduced in the measurement period.

Are employee federal withholdings and employer payroll taxes on wages for the 8-week period included in payroll costs?

The employee federal withholding is included in allowable payroll costs for the purposes of determining the amount to be forgiven. The employer federal payroll taxes (i.e. FICA and Medicare taxes) imposed on the gross payroll are not eligible payroll costs for the loan forgiveness calculation.

Are payments to employees when they are not currently able to work (due to business being closed or for any other reason)?

The PPP was intended to keep businesses’ employees employed and paid. For the PPP loan to be forgiven, a minimum of 75% of the loan proceeds must be spent on payroll. Based on guidance provided currently, the covered 8-week period starts when the loan is funded. If a business is not open and the business’ PPP has been funded, employees will need be paid even if they are not able to work to ensure maximum forgiveness of the loan.