SCORE Answers Questions on PPP Loan Forgiveness

Now that many local businesses have been able to secure Paycheck Protection Program (PPP) loans, there has been a lot of interest in understanding the forgiveness methodology and criteria. So last week as part of the ReStart RI initiative, SCORE Rhode Island held an online workshop on PPP loan forgiveness.

The workshop started with a brief introduction of the workflow (see diagram above) for PPP loan forgiveness. I listed the steps involved in the process, including:

  • Collecting documentation
  • Completing the PPP Schedule A and Worksheet which lists employees during the coverage period
  • Completing the PPP Loan Forgiveness Calculation Form

Then a panel of SCORE experts, including Bill Welsh, David Lucier and myself, offered their input and advice to the audience. They dove into a rich assortment of questions posed by the audience. Just a few are addressed below. For a complete recording of the questions and answers, go to the replay here.

Who decides on forgiveness, the bank or the SBA? Borrowers must submit their PPP Loan Forgiveness Application to the lending bank that issued their PPP loan. The Bank will perform the initial review of your forgiveness application and then submit the application to the SBA for final review and approval.

Are there any templates for calculating loan forgiveness? Payroll companies are developing reports to assist you in completing your loan forgiveness application. While some of the forgiveness calculations are easy to understand, other calculations will require assistance from your attorney or CPA.  In addition, contact a SCORE mentor for assistance in completing the application.

Are there still PPP funds available? There are still PPP funds available and if you want to avail yourself, you can and should apply. If you are having problems finding a bank that will accept your PPP loan application, contact a SCORE mentor and they will assist you.

Do payments for retirement, such as 401k deferrals or matches, count in the amount included for forgiveness? Yes.  However, there are certain limitations for owner-employees.

A small retail store can’t open until June 8th, so they can't bring back employees until then, but they received their PPP loan on May 5th. Will they still be eligible for full forgiveness? As the regulations are written right now the eight week forgiveness period begins when the money hits the bank account. While there is speculation that Congress will make adjustments to the Paycheck Protection Program, you should rely on current regulations regarding the program in completing your forgiveness application.

What does a 1099 contractor or sole proprietor need to do to qualify for loan forgiveness? They would have Schedule C income, not payroll income. So instead of filling out the Schedule A worksheet with employee data, they would enter their personal income. This requires distributions that are documented by payments. In order to have a record of paying yourself, write a check to yourself and deposit it to your personal account.

If there is a bonus paid during that eight week period would that amount be appropriate for inclusion in the forgiveness calculation? Yes, but it's limited to the $100,000 annualized which equates to $15,003. However, you want to make sure consistently apply the principles to the forgiveness calculation that you used to qualified for the loan. Substituting bonuses for headcount is not a good practice and may result in an adjustment to the amount that is forgiven.  There are also limitations on owner-employees.  Their cash compensation during the Covered Period is limited to their 2019 employee cash compensation and employer retirement and health care contributions made on their behalf.

On the loan application page when you're asked to input the number of employees, if everyone was laid off do you enter zero or the number of employees before the layoff? Use the number of employees that you had on your staff on February 15, 2020.

If you have employees out on extended family medical leave act or who will not come back to work, will the business be penalized in forgiveness? There's a mechanism for this issue within the PP loan forgiveness process. If you give notice to those employees that you want to rehire them and then they formally reject your offer, you can exclude them from the calculation. However, if you don't replace those employees and you don't replace that payroll, then the amount of your forgiveness will be based on your actual payroll costs.

If you use 100% of your loan for payroll, will you have 100% forgiveness? Generally yes.

If you hire a new employee and use the PPP money to pay them, can it be forgiven? Generally yes, within the loan guidelines.

Are there penalties for loans that are not fully forgiven?  No penalties, just 1% interest and loan repayment by the loan maturity date of two years.  All payments are deferred for 6 months; however, interest will continue to accrue over this period.

Are shareholders of an S Corp, who are also W-2 employees included or excluded from payroll that can be forgiven? Included, because they are W-2 employees.

There was far more material than can be covered here, so for a full replay check out the web seminar recording online by clicking here.  

Please note: The information provided in this presentation does not constitute legal, tax or accounting advice, but is designed to provide a current understanding of the Paycheck Protection Plan forgiveness calculation. These are not the opinions of SCORE or the SBA.   You should rely on the guidance provided by the SBA and US Treasury Department.  They are required by law to provide guidance on the calculation of PPP loan forgiveness.

This is just one of SCORE’s weekly series of workshops. Go to to learn more or to register for future workshops. As always, SCORE volunteers are available to assist you. Feel free to reach out to your local SCORE chapter at or call 401-226-0077.

For more than 50 years, SCORE has helped more than 11 million aspiring entrepreneurs and small business owners through mentoring and business workshops. More than 11,000 volunteer business mentors in more than 300 chapters serve their communities.

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About the Author(s)

 Bill  Cunningham

Bill Cunningham is a SCORE Rhode Island mentor and workshop instructor, focusing on business models, business planning, and QuickBooks Online. He is a CPA with more than 30 years of working in the television industry.

SCORE Answers Questions on PPP Loan Forgiveness