PPP forgiveness calculator – Prior version (5/22/20 – 6/17/20) – Excel
Please see our important disclaimer regarding use of the calculator inside the Excel spreadsheet. We recommend all borrowers consult with their bank, legal, financial, and business advisors regarding interpretation and implementation of the loan forgiveness program. We aren’t part of the SBA and clearly aren’t PPP experts, but we hope you will find our calculator educational and informative.
Biggest changes to the CARES Act forgiveness legislation:
- Borrowers can elect a 24-week coverage period instead of 8-week.
- Portion of forgiveness associated with payroll lowered to 60% from 75%.
- Creation of 3508EZ form (previously there was just one form)
To qualify to use the 3508EZ form, borrowers must meet one or more of the following criteria:
- Applied for PPP loan as self-employed, independent contractor, or sole proprietor with no employees
- No more than 25% reduction in salary or wages for any employee, with no reduction in number of hours of their employees (Laid-off employees who refused an offer to return are considered exempt)
- No more than 25% reduction in salary or wages during the covered period and experienced reductions in business activity as a result of COVID-19 health directives
Our previous comments on PPP loan forgiveness back in May 2020 for those interested:
One overlooked aspect of the PPP is the calculation of debt forgiveness. We believe that without changes many borrowers will owe between 10% – 30% of their SBA loan amount after the 8-week post-loan period due to:
1) Lack of demand – Many businesses will not see robust demand for their products or services while coronavirus rages and will be reluctant to rehire laid off workers especially those which can’t operate at full capacity due to governmental restrictions.
2) Lack of supply – Many businesses will have difficulty rehiring due to robust unemployment compensation that in many cases is more than their pre-coronavirus wages. The SBA did account for this scenario in the forgiveness application and is making exceptions in cases where employers attempt to rehire but the employees decline.
3) The math – The calculation of the maximum SBA loan amount is based on 2.5x months of payroll costs (~76 days), whereas the loan forgiveness calculation is based on eight weeks (56 days). So the debt forgiveness period is 74% shorter than the maximum debt calculation period.
Stay tuned in the weeks and months ahead to see if there are legislative or executive action taken to modify the loan forgiveness calculations. We are speculating the most plausible modifications to the forgiveness program will be:
* Allowing forgivable non-payroll expenses above 25%. The 25% limitation was not written into the CARES Act.
* Modifying start date of forgiveness period. Currently the eight week window starts at on the loan disbursement date. We believe there will be flexibility provided here for businesses that can’t operate at full capacity due to government mandates (e.g., eight weeks may start the first week in which a business isn’t restricted in terms of customer capacity).
* Providing more than eight weeks for forgiveness. Providing 12 to 16 weeks is the most plausible adjustment, which would dramatically reduce the stress level for many small business entrepreneurs with PPP loans.