PPP Loan Forgiveness

PPP Loan Forgiveness

Loan Forgiveness

The PPP program provides an opportunity for complete loan forgiveness, if the PPP loan proceeds are spent on qualified expenses. Qualified expenses are defined as:

  • incurred within the 8 or 24 weeks before June 5th; and 24 weeks after June 5th period starting on the day loan funds are received,
  • include payroll, rent, utilities and interest on mortgages,
  • and at least 60% of qualified expenses must be used to fund payroll.

The forgiven amount cannot exceed the principle amount of the PPP loan.

According to what we know today, the following are considered eligible use of funds that qualify for loan forgiveness:

Payroll Costs

For a business payroll costs are payments to employees that are:

  • Salary, wages, commissions, or similar compensation (up to an annualized $100,000 per employee)
  • Cash tips or equivalent
  • Vacation, parental, family medical, or sick leave (excluding payments for emergency paid sick leave or expanded family and medical leaves)
  • Separation or dismissal pay
  • Group health insurance
  • Retirement benefits
  • State or local payroll tax (but not federal payroll tax)

Mortgage Interest 

Any interest on indebtedness incurred in the ordinary course of business before February 15, 2020. Principal payments or prepayments are not qualified expenses.

Rent Payments

Any payments of rent under a leasing agreement in force before February 15, 2020.

Tip: Borrowers who have been approved for PPP loans should consider waiting at least until the expected SBA guidance comes out before entering into new lease arrangements. Businesses should maintain adequate records of rent payments.


Utilities include electricity, gas, water, transportation,telephone, or internet access for which service began before February 15, 2020.

  • However, there is still a question whether utilities were intended to cover transportation, telephone, and internet expenses. We are waiting further guidance from the SBA on this issue.