One of the most common questions business owners ask about the Paycheck Protection Program (PPP) rules and regulations is ‘how do I calculate my PPP loan amount?’ Use this PPP loan calculator guide and accompanying on-demand webinars make it simple to calculate and maximize your PPP loan amount when you apply for a PPP loan.
In general, you can borrow up to 2.5x your average monthly payroll (restaurants and accommodation businesses with NAICS codes starting in 72 can borrow up to 3.5x). However, SBA has very specific requirements about what can and not be included in these costs.
When you apply for PPP, it is your responsibility to determine your loan amount as accurately as possible. We will verify your loan amount as part of our underwriting process but providing an accurate amount and calculation as part of your application will help streamline your borrowing process.
While these tools will help most business owners determine their PPP loan amount, you may have more specific questions. Your accountant or bookkeeper will be the best resource for one-on-one support as you calculate your PPP loan amount. As your lender, Pursuit is not able to provide you with advice specific to your unique business situation.
Let’s get started!
First, determine which PPP loan amount calculation method to use
First, you’ll need to identify the most appropriate PPP loan amount calculation for your business based on its entity structure, how you report your taxes, and other factors (such as if your business is seasonal or in farming or ranching).
PPP loan amount calculation methods
It should be easy for you to recognize which calculation to use based on your business’s structure and how you file taxes. Click on the method’s title to skip to view a downloadable, easy-to-use guide and (for most methods) an on-demand webinar.
- Method #1: Primarily for C-Corporations, S-Corporations, and Non-Profits (most common)
- Method #2: Sole Proprietors and other businesses that report on Schedule C – No Employees
- Method #3: Sole Proprietors and other businesses that report on Schedule C – With Employees
- Method #4: Partnerships and other businesses that report on Form 1065
- Method #5: Farmers and Ranchers – No Employees
- Method #6: Farmers and Ranchers – With Employees
- Method #7: Seasonal Businesses
Is your business seasonal?
If your business is seasonal (most businesses are not), according to PPP rules and regulations, you qualify to use a different calculation that takes into account the fact that you are not operating year-round. If your business is seasonal, use the calculation for seasonal businesses even if you fit into one of the other categories above. Your business is seasonal if it meets one of the following two requirements:
- It does not operate for more than seven months in any calendar year
- During the preceding calendar year, it had gross receipts for any six months of that year that were not more than 33.33 percent of the gross receipts for the other 6 months of that year
Access an easy-to-use calculator
In addition to these tutorials, you can also access an easy-to-use PPP loan calculator that will calculate for you using these methods.
Which payroll costs are eligible for PPP?
- If you run a business with employees, you’ll need to determine your eligible payroll costs to calculate your PPP loan amount. Basic details are provided in the instructions for each method; here, we dig a little bit deeper into what you can and—importantly—cannot include. According to PPP rules and regulations, you may use either calendar year 2019 or 2020 information to calculate your payroll.
Calculating payroll costs based on calendar year 2020 or 2019 rather than the trailing twelve months will simplify the calculations and documentation requirements for you because payroll records are more commonly created and retained on a calendar-year basis. Most third-party payroll processing companies offer features that allow you to easily pull payroll reports that can be used for your PPP application. Check with your provider to see what tools are available.
Here’s what you can include in payroll costs:
- Salaries, commissions, or similar compensation. You can obtain these figures from any of the following sources:
- Annual payroll from payroll processor records (payroll reports can be from companies such as Paychex, ADP, Justworks, Gusto, and many others)
- IRS Form 940 (Annual payroll is shown in Box #3 in this document)
- IRS Form 941 (Provide 2019 or 2020 Q1-Q4 statements. Annual payroll is determined by adding Line 5c-Column 1 for each quarter (Q1-Q4) to determine the annual payroll cost)
- State quarterly wage unemployment insurance tax reporting forms from each quarter in 2019 or 2020
- For a seasonal business, a payroll report for any 12-week period selected by the seasonal employer beginning February 15, 2019 and ending February 15, 2020
- Cash tips (based on employer records of past tips or, if you do not have these records, a reasonable, good faith estimate of such tips)
- Payment for vacation, parental, family, medical, or sick leave and allowance for separation or dismissal (You can obtain this information from payroll processor records)
- Payment of state and local taxes assessed on compensation of employees. You can obtain these figures from:
- State unemployment tax and quarterly wage reporting forms
- Payroll processor records
- The net profit (line 31) from your Schedule C (for independent contractors or sole proprietors that report on Schedule C)
- For Partnerships and LLCs which report on IRS Form 1065, you may include self-employment earnings (Box 14 A of each owner’s K-1 statement). The full 1065 will be requested to verify what is reported in Box 14 A
- Employee benefits such as group health care or group life insurance, disability, vision, or dental insurance (including premiums), and retirement. You can obtain these figures from these sources:
- Payroll processor records
- Account statements
- If you are a Schedule C or Schedule F businesses, please reference your loan calculation method as the rules are method-specific
Here is what you specifically cannot include in payroll costs:
- Payments to 1099 employees (independent contractors can apply for a PPP loan on their own, so they do not count for purposes of a borrower’s PPP loan calculation)
- Guaranteed payments to partners
- Any compensation to an individual employee more than $100,000 (for example, if an individual earns $110,000, only $100,000 can be included in the loan calculation)
- Any compensation of an employee whose principal place of residence is outside of the United States
- Federal employment taxes imposed or withheld during the applicable period, including the employee’s and employer’s share of FICA (Federal Insurance Contributions Act) and Railroad Retirement Act taxes, and income taxes required to be withheld from employees. This is not common
- Qualified sick and family leave wages for which a credit is allowed under sections 7001 and 7003 of the Families First Coronavirus Response Act (Public Law 116–127)
How to calculate your PPP loan amount: step-by-step guides
Now that you have your payroll costs calculated, use the method you determined in step 1 to determine your Paycheck Protection Program loan amount:
Method 1: C-Corporations, S-Corporations, and Non-Profits
Method #2: Sole Proprietors and other businesses that report on Schedule C – No Employees
Method #3: Sole Proprietors and other businesses that report on Schedule C – With Employees
Method #4: Partnerships and other businesses that report on Form 1065
Method #5: Farmers and Ranchers – No Employees
Method #6: Farmers and Ranchers – With Employees
Method #7 - Seasonal Businesses
Apply for a Paycheck Protection Program Loan
Now that you’ve calculated your Paycheck Protection Program loan amount, you’re ready to apply. Businesses in New York, New Jersey, Pennsylvania and beyond can apply for a second PPP loan or apply for a first PPP loan through Pursuit. You’ll benefit from working with an experienced PPP lender that provided more than 7,000 PPP loans in 2020 and can rest assured that your loan is processed with SBA accurately and efficiently. We’re looking forward to working with you!