Mar 01, 2021

The Small Business Owner’s Guide to PPP Loan Forgiveness

If you are an American small business owner, 1 of the most important words on your mind right now is probably “forgiveness.” No, that doesn’t mean you’re going to apologize to your neighbor for never returning the Weedwacker he lent you a few summers ago. Too much time has passed and that conversation would be super awkward.

The forgiveness that’ll make the biggest impact in your life right now comes in the form of a Paycheck Protection Program (PPP) loan. Congress has approved a new round of these amazing loans as part of the recent $900 billion coronavirus relief package. If you qualify and then meet all the program’s criteria, you can qualify for forgiveness up to 100% of the loan’s principal.

How Your PPP Loan Must Be Spent

Who among us would prefer anything less than 100% forgiveness? But receiving even the smallest amount of forgiveness on your PPP loan is dependent on following several important government requirements.

First off, you must be judicious in how you spend the money. Because paychecks are the program’s prime consideration, at least 60% of your PPP loan funds must go toward payroll costs. Previously, the PPP loan could only be potentially forgiven if 75% of the loan was spent on eligible payroll expenses, so this lower ratio offers more flexibility for small business owners.

The other qualified category for costs and expenses is referred to as “other business expenses.” Let’s take a closer look at what falls within these 2 categories:

Payroll Costs for PPP Loans

  • Compensation in the form of salaries, wages, commissions, or similar compensation up to $100,000
  • Payment of cash tips or equivalent
  • Payment for vacation, parental, family, medical, or sick leave
  • Allowance for dismissal or separation
  • Payment of retirement benefits
  • Group vision, dental, disability, or life insurance
  • Payment of state or local taxes assessed on the compensation of employees

Other Business Expenses for PPP Loans

  • Healthcare costs related to the continuation of group healthcare benefits during periods of sick, medical, or family leave, as well as insurance premiums
  • Mortgage interest payments (but not prepayment or payment of the mortgage principal)
  • Rent
  • Utilities
  • Interest on any other debt obligations incurred before February 15, 2020
  • Refinancing an SBA EIDL received between January 31, 2020, and April 3, 2020
  • Covered expenditures such as business software or cloud computing services that facilitate:
    • business operations
    • product or service delivery
    • the processing, payment, or tracking of payroll expenses, human resources, sales, and billing functions
    • accounting or tracking of supplies, inventory, records, or expenses
  • Covered property damage costs
  • Covered supplier costs
  • Covered worker protection expenditures

Be advised that the “covered period” for these approved expenses is the date range that begins when your PPP loan is disbursed and ends on a date you select between 8 weeks after your PPP loan is disbursed and 24 weeks after your PPP loan is disbursed.

How Do I Apply for Loan Forgiveness?

You should not contact the SBA directly for loan forgiveness. You’ll first need to apply for PPP loan forgiveness through your lender, and they will submit the application to the SBA on your behalf.

If your PPP loan amount was $150,000 or less, the SBA has created a streamlined forgiveness application that saves you a lot of time and effort. The 1-page application lists, among other things:

  • Your SBA PPP loan number
  • Your Lender PPP loan number
  • Your PPP loan amount (PLP)
  • Your PPP loan disbursement date
  • Your number of employees at time of loan application
  • Your number of employees at time of forgiveness application
  • The covered period
  • Amount of loan you spent on payroll costs
  • Your requested loan forgiveness amount

If your loan had a value higher than $150,000, you might be feeling a little jealous right now. But don’t worry. While your paperwork will be more substantial, it’s still not too difficult to complete. You can prepare by collecting these details and documents, among others:

  • Your business name: business legal name, DBA, trade name (if applicable)
  • Your business Tax Identification Number (TIN): Social Security number (SSN) or Employer Identification Number (EIN)
  • Your SBA PPP loan number 
  • Your Lender PPP loan number (PLP)
  • Your PPP loan amount
  • Number of employees at the time of your PPP application
  • Number of current employees
  • Your PPP loan disbursement date
  • Payroll schedule
  • Cost of covered non-payroll expenses 
  • Copies of canceled checks
  • Bank statements with ACH information
  • Utility bills
  • Mortgage statements
  • Lease agreements
  • List of all employees on your payroll during the covered period
  • Evidence that your employees were kept on payroll or rehired upon receiving the loan

The SBA requires that you or an authorized representative of your business certifies that the documentation you have submitted is all true. You will also need to certify that the money you are seeking to have forgiven was all used in compliance with the program’s guidelines.

Is Full Loan Forgiveness Guaranteed?

Borrowers shouldn’t necessarily expect to have the entire principal of their loan forgiven. There are lots of factors that go into it. What’s important is that you carefully track all your spending and make sure your records are accurate.

After submitting your application to your lender, it can take up to 60 days for them to complete their review. Assuming they approve your application, it will be sent to the SBA. This final review with the SBA can take up to 90 days.

If you receive the full forgiveness amount you’re seeking, you can take pride in the fact that your impressive ability to follow the program’s rules has brought massive financial benefits to your business.

If your loan isn’t entirely forgiven, the remaining amount of money will continue to accrue interest at 1% over the duration of the loan term. You can make regular payments for the complete loan term or repay the amount early. Fortunately, you don’t need to worry about any penalties or fees associated with early repayment.

Many small business owners are leveraging Sunrise’s resources to help them track their business expenses and prepare their forgiveness application. We provide a helpful forgiveness application checklist, insightful articles, and a searchable knowledge base. And if you prefer to speak with 1 of our PPP Loan Forgiveness Advisors, don’t hesitate to reach out.


Disclaimer: The information provided in this post does not, and is not intended to, constitute business, legal, tax, or accounting advice. All information, content, and materials available in this post are for general informational purposes only. Readers of this post should contact their attorney, business advisor, or tax advisor to obtain advice with respect to any particular matter.

About the author

Grant Olsen
Grant Olsen
Grant Olsen is a writer specializing in small business loans, leadership skills, and growth strategies. He is a contributing writer for KSL 5 TV, where his articles have generated more than 6 million page views, and has been featured on and Grant is also the author of the book "Rhino Trouble." He has a B.A. in English from Brigham Young University.


  1. Isn’t company retirement part of payroll expenses?

    • Joni, upon reviewing the SBA guides, you are correct, company retirement can be included as part of payroll expenses. You can include them. Great question!

  2. Thank you guys I already started way before I was approved my bookkeeper Angelyn has been amazing help and a miracle worker for our business. I cannot thank you guys enough!!

  3. Jarum, I know we need to cap the payroll for anyone over 100k at $1923./week. But what if they are also owed unused vacation during the 8 weeks? Do we pay them the regular 1923.00 for payroll and are we also able to pay the 72 hours of unused vacation out of the PPP funds or ANYTHING OVER 1923.00/WEEK per person is not allowed period. Vacation would be considered a benefit, same with medical or profit sharing contributions, so would we as a company not receive any forgiveness for any amount paid out for benefits to anyone over the 1923.00 cap?

  4. I own my business which is incorporated. I draw a check from the corporation when I pay myself. Do I still need a 1040C?

  5. Thanks for the information. So for right now is Lendio advising that PPP customers hold off on beginning a forgiveness filing in lieu of the digital/automated process you are working on?

    • Thank you for the question. After the SBA provided forgiveness guidance, small business owners were granted a specified time period within which to submit their PPP Forgiveness application. Sunrise and Lendio will be rolling out a solution in the coming days to assist in putting together a PPP Forgiveness application within the time frames set forth by the SBA. Lendio does not advise PPP customers generally as to what is best in their situation, and we urge you to consult with a relevant professional to get the advice necessary for your specific situation.

  6. Are independent contractors payments part of the loan forgiveness category?

    • Hi Sandra – based on my team’s research, independent contractors should not be part of the employers PPP > they are considered their own entities and can apply themselves. The one variance to this might be based on your original application. If you bank is approving such an expenditure, you possibly can work with them. However, based on the research, the answer unfortunately points to “no”. Great question!

  7. What about a Self employed contractor? Can a self employed contractor use any of the money towards a SEP IRA? If so, how is it calculated?

    • Hi Tom: Based on my team’s research, 3rd Interim Final Rule clarifies that retirement contributions for unincorporated sole proprietors are excluded from payroll costs in calculating the maximum loan amount under the Paycheck Protection Program (PPP)—and so can’t be forgiven under the terms of that program. Regulations around this can change, so keep us posted if you see anything different.

  8. Thanks 4 all the help u guys do 4 us small guys Earl

  9. Thanks for writing – I received my loan on June 17th, 2021. Is there a deadline for submitting my PPP loan forgiveness application?

  10. We received our 2nd PPP Loan on 3/30/2021 and we haven’t received any emails/link on where to file for forgiveness? when we should expect the email/link to file? Thanks.

  11. I’m having major issues, 1st the name on the loan, and another with our lender adding incorrect amounts into the forgiveness application. I have worked with 4 different lender Reps. each comes up with a different amount of numbers. Can someone help me understand why they are not using 100% of my payroll in the 24 week period, and my 941’s, and Ca. EDD and Texas EDD. Does the lender fill out the application? Or can the Company fill out the application?

    • Hi Mr/Ms Rivera – that is definitely a strange one to read about. Not sure what’s going on with the lender. I’m going to have my team reach out to you directly. Sounds very frustrating, hoping they can help sort it out for you. Thanks!

  12. I need help

  13. I’m having a little I problem with me house rent ,so I need to pay for it and some bills ,, I need a loan to sort it out. If I can get the loan I will be very happy

  14. My lender is refusing to release my loan so that I can use the direct portal with SBA. Additionally, they are populating the maximum forgiveness amount in the application prior to me filling out. They are saying they have to use 2019 tax forms (940 and 1120s) and refusing to use 2020 tax forms documenting payroll and expenditures during the covered period (May 4, 2020 to October 18, 2020). I have asked repeatedly for them to show me where in the SBA rules for lenders it says they must use 2019 tax documents. They cannot show me but tell me I have no recourse to object. They say I must agree to their amount on the application. Any advice?

    • I’m not sure why this particular lender is requesting that as part of the process. I’ll have a colleague reach out to you. So sorry that you’re going through this frustrating situation. Hopefully the lender can sort out the discrepancy.

  15. I’m ready to submit my application for pop forgiveness

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