The Small Business Administration (SBA) and the Department of the Treasury have released the Paycheck Protection Program (PPP) Loan Forgiveness Application with detailed application instructions. The instructions provide borrowers with guidance on how correctly to apply for PPP loan forgiveness.

The new application simplifies the forgiveness process, and it also identifies ways to reduce compliance burdens for borrowers while still allowing them to broaden their eligible burden threshold.

Eligible Payroll Costs

According to the guidance provided by the Treasury and SBA, “borrowers are generally eligible for forgiveness for the payroll costs paid and payroll costs incurred during the eight-week (56-day) Covered Period (or Alternative Payroll Covered Period) (“payroll costs”).” Payroll costs are recognized as paid on the day that paychecks are distributed or when the Borrower originates an ACH credit transaction. Payroll costs qualify as incurred on the day that the employee’s pay is earned.

Payroll costs must be:

  • paid during the Covered Period (or Alternative Payroll Covered Period) or

  • incurred but not paid during the Borrower’s last pay period of the Covered Period (or Alternative Payroll Covered Period) and paid on or before the next regular payroll date.

*Costs can only be "counted" once for forgiveness under one of these bullet points, not both.

Business Owner Compensation: Forgivable cash (non-benefit) compensation paid to business owners, including self-employed individuals and general partners, is limited to the lesser of $15,385 or eight weeks' worth of their 2019 cash (non-benefit) compensation. In other words, business owners cannot receive forgiveness for increases in compensation paid to themselves during 2020 as compared to 2019.

Eligible Non-payroll Costs

Qualified non-payroll costs have to be paid during the Covered Period or acquired during the Covered Period and paid on or before the next regular billing date, even if the billing date is after the Covered Period. Please note that acceptable incurred paid/non-paid non-payroll costs can only be counted once and cannot exceed 25% of the total forgiveness amount.

Appropriate non-payroll business costs: These costs must be paid or incurred during the Covered Period pursuant to leases or other contracts that were in effect before February 15, 2020.

  • Mortgage: interest payments on real or personal property; this does not include any prepayment or payment of principal

  • Rent: payments pursuant to lease agreements

  • Utilities: payments for a service for the distribution of electricity, gas, water, transportation, telephone, or internet access

FTE Safe Harber & Reduction Exceptions

The Average FTE calculation accounts for the average full-time equivalency (FTE) during the Covered Period or the Alternative Payroll Covered Period. A simple way to calculate employee FTE is to gather the average number of hours paid per week, divide this by 40, and round the total to the nearest tenth.

  • The maximum for each employee is capped at 1.0.

As we know, borrowers are eligible for loan forgiveness for some expenditures during the Covered Period or the Alternative Payroll Covered Period. However, the Borrower’s final loan forgiveness total can be reduced if it is uncovered that the average weekly FTE employee hours reported for the Covered Period or the Alternative Payroll Covered Period is actually less than the chosen period referenced.

However, it is also possible under certain circumstances that employees fired for cause, employees who voluntarily resigned or requested fewer hours, or employees who refuse a written, good-faith offer to return after being laid off will not result in a reduction in loan forgiveness due to the FTE reduction they may cause.

Moreover, the Borrower may be exempt from this reduction altogether if they qualify for the FTE Reduction Safe Harbor, which requires both of the following conditions to be met.

  • The Borrower reduced FTE employee levels in the period beginning February 15, 2020, and ending April 26, 2020

  • The Borrower then restored its FTE employee levels by not later than June 30, 2020, to its FTE employee levels in the Borrower’s pay period that included February 15, 2020.

We are here to help

The Treasury Department, in conjunction with the SBA, will provide us with more guidance and regulations intended to give borrowers and lenders regulations and guidance to further assist borrowers in navigating the application process and providing lenders with more insight into their responsibilities within the forgiveness process.

Fusion CPA is committed to helping you navigate this process because, as a small business ourselves, we are experiencing a lot of the same pain points you are. So whether you need to discuss your economic uncertainty documentation or decipher and catalog your use of funds requirement for PPP loan forgiveness application, we want to connect with you. Contact us today; we are genuinely all on this together.


This blog article is not intended to be the rendering of legal, accounting, tax advice or other professional services. Articles are based on current or proposed tax rules at the time they are written and older posts are not updated for tax rule changes. We expressly disclaim all liability in regard to actions taken or not taken based on the contents of this blog as well as the use or interpretation of this information. Information provided on this website is not all-inclusive and such information should not be relied upon as being all-inclusive.

  • Guide you in gathering all of the required documents you need to apply for an SBA loan.
  • Calculate the amount that you will be eligible to borrow under the 7(a) PPP forgivable loan program by analyzing qualified included and excluded expenditures.
  • Assist you in connecting with your SBA lender.
  • Consult on comparing loan options

  • Analyze & optimize eligibility for loan forgiveness for expenditures during the 8 week period beginning on the date of the origination of the loan
  • Consult on reduction on the number of employee headcount & reduction of greater than 25% in wage rules
  • Calculate how much of the borrowed funds will be forgiven at the end of the 8-week period.