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Understanding PPP Loan Forgiveness

Paycheck Protection Program borrowers may be eligible for full or partial loan forgiveness. Understanding how to get your PPP loan fully or partially forgiven and completing the application properly can determine any repayment requirements after your deferment period.

CRF can help you work through the loan forgiveness process, including new changes mandated by new forgiveness rules. We will keep you updated as additional guidance from the SBA is received.

Paycheck Protection Program Loans are intended for small businesses to help them pay a variety of businesses expenses during this pandemic, including spending 60% or more of your PPP loan on payroll (wages and salaries), certain employee benefits (health, dental, group life, state/local unemployment taxes, and retirement contributions. Up to 40% of your loan may also be used for business rent, mortgage insurance, utilities, and now certain other normal operating expenses as well as PPE and other expenses to adapt your business activities due to the pandemic.

If your business uses the loan proceeds for these eligible expenses, they may be eligible for full or partial loan forgiveness.

Understanding how to get your PPP loan fully or partially forgiven and completing the application properly can determine any repayment requirements after your deferment period.

CRF can help you work through the loan forgiveness process, including new changes mandated by new forgiveness rules. We will keep you updated as additional guidance from the SBA and Treasury Department is received.



Once you receive your loan, it must be used or eligible expenses that are either paid or incurred during your ‘covered period’.  The length of your covered period may vary, depending on when you received your loan.  For new loans made in 2021, you may choose a ‘covered period ‘ of 8 to 24 weeks beginning when you receive your loan.

Previously, there was some leeway in the covered period when it comes to paying wages and salaries If you are on a weekly or bi-weekly payroll, you could elect to use an ‘alternative payroll covered period’ in order to avoid splitting payroll periods. We are currently waiting on SBA guidance as to whether this alternative payroll covered period’ will be allowed for new loans, or second draw loans made in 2021.  We discuss the alternative period below.


Application and repayment
In 2021, businesses now have between 8 and 24 weeks to use PPP loan proceeds for eligible expenses (the ‘covered period’).

For loans made in 2020; those loans received before June 5, 2020can elect either the 8-week or 24-week covered periods for their forgiveness applications; and those loans received after June 5 and through August 8, 2020 have a 24-week covered period.

Once the covered period has ended, businesses generally have up to ten months to apply for forgiveness, but it is much better to apply for forgiveness right away.

You must apply for forgiveness through your Lender (CRF), and we have already set up a process to make this as easy and straight forward as possible.  When you are ready to get started, click here to access our loan forgiveness portal.

Once you complete your forgiveness application and upload the required supporting documents the SBA requires us to collect, we will review it and may have a few questions for you as we get it ready to submit it to the SBA. When we have completed that review, we will ask you to sign your forgiveness application electronically (using the Docusign system), and then send it to the SBA for processing, which can take up to 90 days.

Based on our experience with over 1,000 loans now completed, nearly all loans will be fully forgiven – provided the loan is spent on eligible expenses. However, some businesses may have small amounts that need to be repaid.

Repayment of unforgiven amounts will not start until after the forgiveness application has been reviewed and approved (or denied) by the SBA. The loan balance (and accrued interest) that is not forgiven will become a term loan with an interest rate of 1%, and require monthly payments.


Eligible payroll costs and calculations
You can find more guidance about which costs are eligible on our resources page, but here are a few pointers to remember.

  • At least 60 percent of your loan proceeds must be spent on payroll costs.
  • Spending less on payroll costs may reduce or void loan forgiveness.
  • Salaries and wages during the 8 to 24-week covered period cannot exceed between $15,385 and $46,154 per employee, respectively (a rate of $100,000 per year).
  • Salaries or wages paid to each business owner is limited to between $15,385 for an 8 week covered period, and up to no more than $20,833 for a covered period of 10 weeks or more.
  • Generally, payroll costs include:
    • Wages and salaries
    • Health care benefits and health insurance premiums, including dental, vision, disability and group life insurance costs.
    • Employer contributions to retirement accounts and pensions
    • State or local unemployment insurance costs


Other eligible purposes
Other than payroll costs, you may only spend PPP loan proceeds on the following eligible costs:

  • Rent payable to third parties for existing leases before Feb. 15, 2020.
  • Utilities, including but not limited to telephone, cell phone, internet access, water, electric, sewer and natural gas.
  • Interest on business installment loans or mortgage debts if the debt pre-dates Feb. 15, 2020. Other business loan interest is now also an eligible expense, provided the loan pre-dates February 15, 2021.
  • Additional ‘covered’ costs that are now eligible expenses
    • Operations expenditures – software or cloud computing service that facilitates business operations, product or service delivery.
    • Property damage – costs of property damage, vandalism or looting during the public disturbances in 2020, and not covered by insurance or other compensation.
    • Supplier costs – essential to your operations at the time the expenditure is made pursuant to a contract or purchase order:
    • Worker protection expenditures – needed to adapt your business to comply with HHS, OSHA, CDC or other guidance issued by governmental units or authorities until the President’s National Emergency declaration ends (it is ongoing as of now).  The covered expenses must be related to maintaining sanitation, social distancing, or other worker/customer safety need related to COVID–19.

Get back to pre-pandemic employment levels at your business, if you can.

While a goal of the PPP loan is to help you keep or re-hire your employees, you are not required to in most cases.

  • If you PPP loan is $150,000 or less, you are not required to have kept or re-hired the same number of employees as pre-pandemic levels. (The SBA is revising the forgiveness rules to include this recent change.)
  • If your PPP loan is for more than $150,000, and
    • Your business was adversely affected by Federal, State or Local guidelines, directives or regulations related to COVID-19, you do not have to keep or re-hire the same number of employees as pre-pandemic levels, plus
    • You did not reduce any employee’s salary or wage rate by more than 25% during the covered period.

These ‘safe harbors’ help you avoid a reduction in your loan forgiveness, provided you use all of your PPP loan proceeds for the eligible purposes noted above.

Otherwise, if you do not meet these safe harbors your forgiveness amount may be lowered if your full-time equivalent (FTE) employment drops when compared to the first several months of 2020.

  • The forgiveness process will let you choose one of two base periods for calculating FTE employment.
  • If an employee declines to return to work, you can still count that employee as “re-hired” on the forgiveness application form, if they could not be replaced with similarly qualified employees. Be sure to document the declination in writing.
  • There is a “safe harbor” if you reduced FTE employment between Feb. 15 and Apr. 26, 2020 but returned to mid-February FTE employment levels on or prior to December 31, 2020. (Note that this ‘safe harbor’ may be revised once the SBA publishes additional guidance.)
  • Businesses can avoid proportional reduction of forgiveness if:
    • The business can’t re-hire individual employees or replace them.
    • The business can document an inability to return to the same level of business activity that existed before February 15, 2020 due to complying with regulatory guidance from federal agencies related to sanitation, social distancing and other COVID-19 safety measures.

After the six-month covered period, any loan balance (and accrued interest) that is not forgiven will become a 18-month term loan with an interest rate of 1% with monthly payments.


If you have received an Economic Injury Disaster Loan (EIDL) advance of up to $10,000, through an application you made directly with the SBA through their website, by phone, or in-person at an SBA office, your PPP Loan Forgiveness may be affected.  Congress recently changed how these are treated, so they are no longer required to be repaid if you also had a PPP Loan.

Using your PPP loan for any ineligible purpose will reduce or void your loan forgiveness.




You will have 10 months from the end of the covered period to apply for forgiveness, although it is best o apply for forgiveness as soon as you can be ready and gather the required documentation. Here are a few tips that will help you understand how forgiveness may apply to your PPP loan and aid you in preparing your documentation before you apply:

Keep current and accurate records.
Prepare a ledger or file of your eligible uses of your PPP loan proceeds. You will need to submit supporting documentation to CRF along with your request for forgiveness, which may include:

  • Copies of your lease and loan documents
  • Payroll registers or reports, along with actual or pro forma Form 941 reports. Contact your payroll service provider as soon as possible and ask for a PPP-compliant payroll report.

For loans over $2,000,000, your documentation must be forwarded to the SBA before determining what portion of your loan should be forgiven.




CRF will help you stay updated on additional changes and extensions of the PPP rules. Take the time now to review and understand the requirements and the process for forgiveness as you proceed through the coming weeks.

All loans subject to credit approval and final guidance from the SBA on the Paycheck Protection Program. Funds are limited and subject to availability.

The information provided is solely for general knowledge and does not provide any professional advice regarding tax, accounting, legal, financial, or any other professional service. PPP borrowers should contact their professional service providers for a complete understanding of the PPP program requirements and forgiveness processes.

SBA regulations regarding the PPP program are subject to further limitations and changes. Borrowers must follow current regulations and processes based on SBA guidelines. All characteristics described above are from the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Economic Aid Act), and/or the Coronavirus Response and Relief Supplemental Appropriations Act. The terms and information outlined above are subject to change upon further rulemaking or guidance from the U.S. Small Business Administration and the U.S. government.