PPP Loan Calculation for First Draw

As of January 17, 2021

PAYCHECK PROTECTION PROGRAM
HOW TO CALCULATE MAXIMUM LOAN AMOUNTS FOR FIRST DRAW
PPP LOANS AND WHAT DOCUMENTATION TO PROVIDE – BY BUSINESS TYPE

The Small Business Administration (SBA), in consultation with the Department of the Treasury, is providing this updated guidance to assist businesses in calculating their payroll costs (and the relevant documentation that is required to support each set of calculations) for purposes of determining the maximum amount of a First Draw Paycheck Protection Program (PPP) loan for each type of business.

Borrowers and lenders may rely on the guidance provided in this document as SBA’s interpretation of the CARES Act, the Economic Aid Act, and the Paycheck Protection Program Interim Final Rules. The U.S. government will not challenge lender PPP actions that conform to this guidance and to the PPP Interim Final Rules and any subsequent rulemaking in effect at the time the action is taken.

The guidance describes payroll costs using the calendar year 2019 as the reference period for payroll costs used to calculate loan amounts. However, borrowers are permitted to use payroll costs from either calendar year 2019 or calendar year 2020 for their First Draw PPP Loan amount calculation.2 Documentation, including IRS forms, must be supplied for the selected reference period.

I am self-employed and have no employees, how do I calculate my maximum First Draw PPP Loan amount? (Note that PPP loan forgiveness amounts will depend, in part, on the total amount spent by the borrower during the covered period following disbursement of the PPP loan.)

The following methodology should be used to calculate the maximum amount that can be borrowed if you are self-employed and have no employees, and your principal place of residence is in the United States, including if you are an independent contractor or operate a sole proprietorship (but not if you are a partner in a partnership):

Step 1: Find your 2019 IRS Form 1040 Schedule C line 31 net profit amount.3 If this amount is over $100,000, reduce it to $100,000. If this amount is zero or less, you are not eligible for a PPP loan.
Step 2: Calculate the average monthly net profit amount (divide the amount from Step 1 by 12).
Step 3: Multiply the average monthly net profit amount from Step 2 by 2.5.
Step 4: Add the outstanding amount of any Economic Injury Disaster Loan (EIDL) made between January 31, 2020 and April 3, 2020 that you seek to refinance. Do not include the amount of any advance under an EIDL COVID-19 loan (because it does not have to be repaid).

Your 2019 IRS Form 1040 Schedule C must be provided to substantiate the applied-for PPP loan amount. You must also provide a 2019 IRS Form 1099-MISC detailing nonemployee compensation received (box 7), IRS Form 1099-K, invoice, bank statement, or book of record establishing you were self-employed in 2019 and a 2020 invoice, bank statement, or book of record establishing you were in operation on February 15, 2020.

I am self-employed and have employees, how do I calculate my maximum First Draw PPP Loan amount (up to $10 million)? (Note that PPP loan forgiveness amounts will depend, in part, on the total amount spent by the borrower during the covered period following disbursement of the PPP loan.)

The following methodology should be used to calculate the maximum amount that can be borrowed if you are self-employed with employees, including if you are an independent contractor or operate a sole proprietorship (but not if you are a partner in a partnership):
Step 1: Compute your 2019 payroll costs by adding the following:

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If you already have an application in progress, please remember to log in using the same ID and password you created. Please do not start a new application.

ADDITIONAL RESOURCES

The following materials provide additional help and guidance. You will also find the spreadsheet referenced above that will be required as part of your documentation

Loan Calculation Spreadsheet (Required documentation)

To assist you in making your calculations, please download and fill out this Excel Spreadsheet. A completed spreadsheet will be required as part of your application. The online application tool will show you when and where to do that.

Customers with seasonal workers on your payroll, please reference this document to help in your calculations.

If you are submitting an application for a partnership or an LLC that files taxes as a partnership, please reference this document to help in your calculations.

If your business is a sole proprietorship, please reference this document to help in your calculations.

Application Guide

This guide provides line-by-line instructions to help you complete the PPP application. Click here or below to download the SBA-PPP Application Guide document.

SBA-PPP Application Guide

Where to find required information

All applicants will be required to submit certain information through our secure online application portal. Click here to see example documents that will show you where to find the necessary information to assist in completing the application. As noted above, circling or highlighting the specific information used in your application will greatly speed up our ability to process it with SBA.

SBA-PPP Application Documentation Guide

Frequently Asked Questions

Click here to see Frequently Asked Questions about our application portal for the SBA’s Paycheck Protection Program.

If you have any questions, please contact your relationship manager or the customer service team at 1-800-800-4865 for assistance. However, due to high call volume and long wait times, we recommend utilizing our SBA PPP Application Guide and video for help as listed above.

** The information provided in these resources is based upon the best and most current information provided by the SBA. It should not be relied upon as a substitute for legal or accounting advice from applicant’s own advisors. Please note that providing an accurate calculation and documentation of total payroll costs (e.g. paid salary/wages, allowable paid benefits, allowable paid taxes) is the responsibility of the applicant, which will be attested to as part of the application. Therefore, applicant must ensure that the payroll costs utilized to calculate the loan amount are fully aligned with the most recent parameters required by SBA, as described in the SBA Interim Final Rule, SBA PPP Quick Reference Guide, and SBA/Treasury Department PPP FAQs. If applicant has questions on the allowable inclusion of certain payroll costs, it is recommended that they consult their own accounting or legal counsel. Nothing provided herein is to be construed as a promise or guarantee about the approval or forgiveness of an applicant’s loan.**

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