The Paycheck Protection Program (PPP) is a loan program designed to help businesses maintain their workforce during the COVID-19 pandemic. This article provides a step-by-step guide on how to calculate your PPP loan amount.

Step 1: Determine Your Eligibility

Before proceeding, ensure that your business is eligible for a PPP loan. Eligible businesses typically:

1. Have 500 or fewer employees who live in the United States.

2. Were in operation on February 15, 2020.

3. Can provide payroll and tax documentation, such as payroll reports and/or Form 1099-MISC.

Step 2: Calculate Your Average Monthly Payroll

To calculate your PPP loan amount, first determine your average monthly payroll for eligible employees. You can typically use one of two time periods:

1. Calendar year 2019 (January – December)

2. The twelve months preceding the date you apply for the loan

Include salary, wages, tips, commissions, and any other compensation that eligible employees earned during that period. Note that you must exclude any annual compensations above $100,000, employee taxes like FICA and FUTA, or employee benefits.

Step 3: Adjust for Seasonal Businesses

If you operate a seasonal business, you can choose one of these alternative reference periods for calculating your average monthly payroll:

1. February 15, 2019 – June 30, 2019

2. January 1, 2020 – February 29, 2020

Choose the option that best reflects your business’ payroll expenses during its peak operating months.

Step 4: Calculate Your Loan Amount

Once you have determined your average monthly payroll cost for eligible employees, multiply this number by a factor of 2.5 to calculate your maximum PPP loan amount:

PPP Loan Amount = (Average Monthly Payroll) x 2.5

For businesses in the accommodation and food services industry (NAICS Code 72), you can multiply the average monthly payroll by a factor of 3.5 instead:

PPP Loan Amount = (Average Monthly Payroll) x 3.5

Step 5: Add Your EIDL Loan, If Applicable

If you received an Economic Injury Disaster Loan (EIDL) between January 31, 2020, and April 3, 2020, you must refinance the EIDL as part of your PPP loan. To include this in your calculation:

Total PPP Loan Amount = PPP Loan Amount + (EIDL Balance – EIDL Advance)

Make sure not to include the EIDL advance grant amount in your calculation.

Conclusion:

Once you have calculated your PPP loan amount, you can apply for the loan through any SBA-approved lender. Keep detailed records of how you spend the loan proceeds, as this documentation will be necessary when seeking forgiveness for portions or all of the loan amount.