• Derek Carter

PPP—Loan Forgiveness Updated Interpretation

We have received many questions related to how forgiveness calculations will work for the PPP Loan Program. This post will provide our latest interpretation of the law and subsequent guidance as it stands today.


The short version related to forgiveness is we expect the SBA to put out further guidance in the coming days/weeks. We stand by two statements we continue to make in our webinars and the content we are creating:

  1. Talk to your lender. Make sure you fully understand their expectations as it relates to everything in the loan documents. Pay particular attention to how they plan to work through the forgiveness calculations - Ask Questions!

  2. We believe the intent of the law and the related expectation is your business should look the way it did at the end of the covered period as it did pre-virus (in terms of headcount and wages paid.


Summarized information below - mainly from the Cares Act directly (Ceterus comments in italics):


Covered Period "Cost Related" - 8 weeks following loan origination date


Reduction Based on Reduction in Number of Employees - Average number of full-time equivalent employees per month during the covered period divided by:


Either: average number of full-time equivalent employees during the period 2/15/19-6/30/19 OR average number of full-time equivalent employees during the period 1/1/20-2/29/20


This specific program has not defined what a full-time equivalent employee is. During the webinar alone, I received emails from lenders working with our customers. They are noted below (top 2):

  • Any employees with a SSN that received compensation where taxes were withheld/paid by the company.

  • Full time employees who work 30 hours per week or more + aggregate of employees who work less than 30 hours per week, where the employees add up to over 40 hours a week.

  • Full time employees work 30 hours a week

Based on the above, and the vast changes we have seen, we believe that further guidance is necessary related to this topic.


Reduction Relating to Salary and Wages - Reduced by the amount of any reduction in total salary or wages of any employees during the covered period that is in excess of 25 percent of the total salary or wages of the employee during the most recent full quarter during which the employee was employed before the covered period.


It is unclear how forgiveness will work related to this item as it is tied to specific employees.


Exemption for Re-Hires - If between February 15 and April 26 there was a reduction in full-time equivalent employees or a reduction in wages AND

  • the full-time equivalent employees are rehired by June 30 and

  • the wage reduction is eliminated by June 30

the reduction calculations above will not be considered in the forgiveness calculation.


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