Getting your PPP Loan Forgiven: Key Things Borrowers Should Consider

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By: Pooja Keshan and Jyoti Jhaveri

Paycheck Protection Program (PPP) loans have allowed small businesses across the United States to maintain their workforces during the economic downturn caused by the COVID-19 pandemic. PPP loans are forgivable if borrowers meet certain conditions, like spending a certain proportion of loan proceeds on payroll costs and retaining employees. As more businesses finish using their PPP funds and prepare to apply for loan forgiveness, there are a few key things to keep in mind.

qualifying for ppp loan forgivness

PPP borrowers must apply for loan forgiveness within 10 months after the last day of their loan covered period with the same lender that processed their loan. The covered period is the time-period during which the borrower must spend all their PPP loan proceeds and lasts either eight or 24 weeks from the loan disbursement date.

To qualify for loan forgiveness, borrowers must meet certain conditions like:

  • Spending at least 60% of PPP loan proceeds on payroll costs.
  • Restoring employee headcount and wages to pre-COVID-19 levels by December 31, 2020, unless:
    • The business could not find qualified employees, or employees turned down good faith efforts of employment at the same wage and hours as before, or
    • They could not restore business operations to pre-February 15, 2020 levels due to the pandemic.

ppp loan covered period and loan repayment schedule

The PPP loan covered period is either:

  • The 24-week (168-day) period beginning on the PPP loan disbursement date, or
  • If elected by the borrower (payroll borrowers only), eight weeks (56 days) after the loan disbursement date for loans disbursed before June 5, 2020.

Borrowers must start making payments on or before the PPP loan’s maturity date if only a portion of their loan is forgiven or if their forgiveness application is denied. Loans issued prior to June 5 have a two-year repayment period, while loans issued after June 5 have a five-year repayment period. If a PPP loan is fully forgiven, borrowers do not have to make any loan payments.

reductions in ppp loan forgiveness amounts

The amount of a borrower’s loan that is eligible for loan forgiveness can be reduced based on a variety of factors:

  • Any changes to employee headcount or wages can result in a reduced loan forgiveness amount.
  • If the borrower also received an Economic Injury Disaster Loan (EIDL) cash advance, their PPP forgiveness amount will be reduced by the amount of the EIDL advance.


To ensure you maximize your PPP loan forgiveness amount, contact your trusted Chugh CPAs, LLP professional.