How your Paycheck Protection Program (PPP) Loan Amount is Calculated

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Chugh CPAs, LLP Partner and CPA Sukhpaul Hundal explains how your Paycheck Protection Program (PPP) loan amount is calculated during this three-minute video.

PPP loan amounts are calculated based on a business’s average monthly payroll costs. Businesses are eligible for second-draw loan amounts at the following rates:

  • Hotels and restaurants: 3.5 times their average monthly payroll costs.
  • All other businesses: 2.5 times their average monthly payroll costs.

The maximum loan amount available is $10 million for first draw PPP loans, and $2 million for second draw PPP loans.

Calculating Your Average Payroll Cost

Self-employed businesses with no employees can use their gross income to determine their average payroll cost for their Paycheck Protection Program loan. This amount must be $100,000 or less per year.

All other businesses must add up the following amounts to determine their total payroll costs:

  • Total gross wages of up to $100,000 per employee, per year. These include wages paid to employees prior to any deductions for benefits or employee payroll taxes withholding.
  • Total of the employer’s share of contributions to insurance plans.
  • Total of the employer’s retirement contributions.
  • Total of the employer’s share of state payroll taxes.
  • Self-employed businesses can also include their gross income (reduced by the payroll costs listed above) to the total. This additional amount must be $100,000 or less per year.

Most businesses can use either 2019 or 2020 for calculating their PPP loan amount. Businesses must divide their total payroll costs for the year by the number of months in the period selected to determine the average payroll cost.

For more information on the PPP loan application, or how to obtain PPP loan forgiveness, please contact your trusted Chugh CPAs, LLP professional.