May 15, 2020

PPP Loan Forgiveness: Your Guide to Success

As more and more companies across the country have been able to take part in the SBA’s Paycheck Protection Program (PPP) Loans, forgiveness of these loans has become priority for many businesses. Tracking how you use your PPP funds will set you up to meet the SBA’s provisions, and below is your guide on how to do so. Please note that these guidelines are accurate as of the publishing date, but the SBA is working through some minor clarifications, which we will continue to monitor. 

Qualifying Expenses

  1. Payroll: Including salaries, wages, medical and sick leave, and health benefit expenses. Vacation pay also can qualify. 
  2. Rent: So long as your lease agreement was signed before Feb. 15, 2020, rent expense can be forgiven.
  3. Utilities: Again, so long as the service began before Feb. 15, 2020.
  4. Mortgage Interest: So long as the mortgage was signed before Feb. 15, 2020. Mortgage interest can be forgiven. Again, this is mortgage interest only, not principal.

Percentage to Remember: 75%

Payroll must make up at least 75% of your expenses on the loan amount. Again, this amount can include salaries, wages, medical and sick leave, health benefits, and even vacation pay. One major note—payroll expenses are not required to equal 75% of your business’s total expenses, but you must use 75% of the PPP loan amount on payroll. Additionally, if you use more than 75% of these funds on payroll expenses, that also qualifies for loan forgiveness. 

The remaining 25% can be used on rent, utilities, and mortgage interest.

What About Independent Contractors/1099 Employees?

The SBA has indicated that independent contractors are not eligible as a payroll expense. These individuals are eligible to apply for their own PPP loans.

Duration of Expense Tracking: 8 Weeks Is the Magic Number

The expense period to track is 8 weeks. The timer starts on this period the first day your funds are delivered to you. While most lenders are depositing a lump sum, some lenders may elect to make multiple deposits of funds over an 8-week period. Either way, the timing of your tracking must coincide with that first day. Some employers are slightly altering the dates in which they pay their employees to account for this due to the inconsistencies of banks distributing the funds. 

For example, if you receive the funds into your bank account on May 2, your 8-week period for tracking begins on that date. Additionally, if you typically have a payday of May 1 but your lender has communicated the funds would be available on May 2, altering that pay schedule from May 1 to May 2 is a reasonable adjustment. Naturally, you will want to communicate payday changes to your employees beforehand.

Where Do I Apply for Loan Forgiveness?

In short: with your lender. Each lender’s requirements for applications will differ slightly, but all will be based on the SBA guidelines. One provision in the SBA guidelines is that after you have applied for forgiveness, your lender must respond to your application within 60 days.

Which Forms Will I Need to Apply for Loan Forgiveness?

Your lender might ask for additional forms, but plan on submitting the following:

For Payroll

  1. 941 documents for payroll expenses
  2. Reporting documents for health/medical expenses, vacation or sick leave expenses
  3. Some lenders may also require your state filings for income, payroll, and unemployment

For Non-payroll Expenses

  1. Mortgage interest documents for the 8-week period
  2. Rent payments
  3. Utility payments

Self-Employed/Independent Contractors: Variances and Forms

Self-employed individuals are slightly different when it comes to eligible loan forgiveness. They are still eligible for loan forgiveness, but it is not directly tied to payroll. Instead, it is tied to 8 weeks of 2019 net profit. According to the SBA, this amount is called “owner compensation replacement” and does not even have to be expensed. The amount is simply forgiven when the application is approved.

Plan on including you 1040 Schedule C, as well as any other forms your lender requires. Similar to traditional business entities, you should also plan to submit your mortgage interest, rent, and utility documentation.

About the author

Jarum Feichko
Jarum Feichko
Jarum is the Director of Marketing at Sunrise, specializing in Digital Content, Email, and Display. He earned his MBA from the University of Utah and launched his first company soon after. If he's not at his desk, you'll find him gardening, hiking the Rockies, or spending time with his wife and daughter—probably talking their ears off about US presidential trivia.


  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?

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