Paycheck Protection Program – Loan Forgiveness

Schneider Downs continues to track the evolving landscape of Federal Financial Assistance Programs offered due to the disruption of the coronavirus pandemic (“COVID-19”). The CARES Act Paycheck Protection Program (“PPP”) under the Small Business Act is one of the key parts of the Federal government’s relief efforts. 

Below is a summary of the PPP Limits on Amount of Forgiveness (Section 1106 (d)):

The intent of the CARES Act and more specifically the Paycheck Protection Program (PPP) was to help employers maintain their workforce and pay employees during these unprecedented times.  With applications now being accepted and approved for the PPP, our focus is on the business decisions business owners should consider in maximizing forgiveness of the PPP loan.

The Interim Final Rule regarding the PPP was issued on April 2, 2020 and notes that the SBA will issue additional guidance on loan forgiveness; the information below is based on information available as of April 14, 2020.

Allowable uses of loan proceeds

A borrower is eligible for loan forgiveness for the sum of allowable payroll and non-payroll costs incurred and payments made during the covered period. The covered period is defined as an 8-week period starting the day the borrower receives the first disbursement of the PPP loan. Lenders are supposed to make the first loan disbursement ten (10) calendar days after loan approval.

For additional information on allowable uses, see Schneider Downs’ previous Our Thoughts On article: Important Update on the Payroll Protection Program Under the CARES Act at:

Reduction of Forgiveness

Even if during the covered period the borrower uses all of the funds for allowable payroll and non-payroll expenditures, forgiveness under Section 1106 (d) can still be limited for either or both of the following reasons:

  1. Reduction of Number of Employees

A reduction of the number employees will be calculated by dividing the number of average monthly full-time equivalent (FTE) employees during the covered period by the average monthly FTE employees during one of two periods at the borrower’s election:

  • February 15, 2019 through June 30, 2019; or
  • January 1, 2020 through February 29, 2020.

However, if the employer is a seasonal employer as determined by the Small Business Administration (SBA), the borrower is required to use the period from February 15, 2019 through June 30, 2019.

Example: Assuming that the borrower selected the period of comparison for determining average monthly FTE to be February 15, 2019 through June 30, 2019. If during that period (February 15, 2019 through June 30, 2019) the monthly average FTE employees was 100 employees, but during the covered period the borrower’s monthly FTE employees was 80 employees, then the borrowers forgiveness is limited to 80% of the allowable uses (payroll and non-payroll) plus the reduction of salary and wages as described below, if any.

  1. Reduction Related to Salary and Wages

The reduction of salary and wages is related only to employees who did not earn an annualized wage or salary of $100,000 during any period in 2019, according to Section 1106(d)(3)(B). If total wages or salary for those employees is reduced in excess of 25% during the covered period in relation to the most recent full quarter during which the employee was employed before the covered period, the borrower’s forgiveness will be further reduced by the excess.

Example: Assume that the borrower had one (1) employee and their covered period started on April 1, 2020. In addition, during the most recent full quarter, which in this case would have been the period from January 1, 2020 through March 31, 2020, the one (1) employee’s annual wage and salary were $80,000 or approximately $1,538 weekly. If during the covered period, the employee’s average weekly salary and wage was less than $1,154 (or $9,232 total) the borrower would be subject to a reduction of forgiveness




Annual Salary

Weekly Salary


8-Week Salary and Wages

Most recent full quarter





Covered Period










% of Original Salary




Exemption of Forgiveness

There is an exemption from the reduction to loan forgiveness discussed above for re-hiring of employees if:

  • A reduction occurred between February 15, 2020 and April 26, 2020 (30 days after the date of enactment of the CARES Act); and
  • That reduction is eliminated by June 30, 2020.

If the employer experienced a reduction, the borrower will calculate FTE employees and salary and wages as of February 15, 2020 and April 26, 2020. If FTE employees and/or salary and wages have decreased between the periods, then in order to qualify for the exemption, the employer must eliminate that reduction(s) no later than June 30, 2020. It is important to note that there is no $100,000 salary and wage threshold for employees in the exemption of forgiveness.

Below is a table of circumstances that a borrower might have experienced during the period from February 15, 2020 through April 26, 2020, and how a borrower might remediate the circumstance to qualify for the exception.


Scenario 1


Scenario 2


Scenario 3




Salary and Wage



Salary and Wage



Salary and Wage


February 15, 2020 through April 26, 2020










Not later than June 30, 2020

Must be eliminated

Must be eliminated


No action

Must be eliminated


Must be eliminated

No action


If the borrower experiences the circumstances noted above and eliminates the reduction(s), then there is no reduction of forgiveness for either the reduction of FTE employees or reduction of salary and wages noted previously.

Lastly, the SBA and the Secretary of the United States of America Department of Treasury may prescribe regulations granting de minimis exemptions from the requirements.

Please visit our Coronavirus Resource Center for related content.

You’ve heard our thoughts… We’d like to hear yours

The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at [email protected].

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2023 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

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