As of June 26, 2020

PAYCHECK PROTECTION PROGRAM

HOW TO CALCULATE MAXIMUM LOAN AMOUNTS – BY BUSINESS TYPE

The Small Business Administration (SBA), in consultation with the Department of the Treasury, 

is providing this guidance to assist businesses in calculating their payroll costs for purposes of 

determining the amount of a Paycheck Protection Program (PPP) loan businesses can apply for.

Borrowers and lenders may rely on the guidance provided in this document as SBA’s 

interpretation of the CARES Act and of the Paycheck Protection Program Interim Final Rules. 

The U.S. government will not challenge lender PPP actions that conform to this guidance1 and to 

the PPP Interim Final Rules and any subsequent rulemaking in effect at the time.

1. Question: I am self-employed and have no employees, how do I calculate my maximum 

PPP loan amount? (Note that PPP loan forgiveness amounts will depend, in part, on the 

total amount spent during the 24-week period following the first disbursement of the PPP

loan.)

Answer: The following methodology should be used to calculate the maximum amount 

that can be borrowed if you are self-employed and have no employees, and your principal 

place of residence is in the United States, including if you are an independent contractor 

or operate a sole proprietorship (but not if you are a partner in a partnership):

• Step 1: Find your 2019 IRS Form 1040 Schedule C line 31 net profit amount (if you 

have not yet filed a 2019 return, fill it out and compute the value). If this amount is 

over $100,000, reduce it to $100,000. If this amount is zero or less, you are not 

eligible for a PPP loan.

• Step 2: Calculate the average monthly net profit amount (divide the amount from 

Step 1 by 12).

• Step 3: Multiply the average monthly net profit amount from Step 2 by 2.5.

• Step 4: Add the outstanding amount of any Economic Injury Disaster Loan (EIDL) 

made between January 31, 2020 and April 3, 2020 that you seek to refinance, less the 

amount of any advance under an EIDL COVID-19 loan (because it does not have to 

be repaid).

Your 2019 IRS Form 1040 Schedule C must be provided to substantiate the applied-for 

PPP loan amount. You must also provide a 2019 IRS Form 1099-MISC detailing 

nonemployee compensation received (box 7), invoice, bank statement, or book of record 

establishing you were self-employed in 2019 and a 2020 invoice, bank statement, or book 

of record establishing you were in operation on February 15, 2020.

1 This document does not carry the force and effect of law independent of the statute and regulations on which it is 

based.
As of June 26, 2020

2. Question: I am self-employed and have employees, how do I calculate my maximum 

PPP loan amount (up to $10 million)? (Note that PPP loan forgiveness amounts will 

depend, in part, on the total amount spent during the 24-week period following the first 

disbursement of the PPP loan.)

Answer: The following methodology should be used to calculate the maximum amount 

that can be borrowed if you are self-employed with employees, including if you are an 

independent contractor or operate a sole proprietorship (but not if you are a partner in a 

partnership):

• Step 1: Compute your 2019 payroll costs by adding the following:

o 2019 IRS Form 1040 Schedule C line 31 net profit amount (if you have not 

yet filed a 2019 return, fill it out and compute the value); if this amount is 

over $100,000, reduce it to $100,000; and if this amount is less than zero, set 

this amount at zero;

o 2019 gross wages and tips paid to your employees whose principal place of 

residence is in the United States, which can be computed using 2019 IRS 

Form 941 Taxable Medicare wages & tips (line 5c-column 1) from each 

quarter plus any pre-tax employee contributions for health insurance or other 

fringe benefits excluded from Taxable Medicare wages & tips, subtracting any 

amount paid to any individual employee in excess of $100,000 and any 

amounts paid to any employee whose principal place of residence is outside 

the U.S;

o 2019 employer contributions for employee health insurance (portion of IRS 

Form 1040 Schedule C line 14 attributable to health insurance);

o 2019 employer contributions to employee retirement plans (IRS Form 1040 

Schedule C line 19); and

o 2019 employer state and local taxes assessed on employee compensation, 

primarily state unemployment insurance tax (from state quarterly wage 

reporting forms).

• Step 2: Calculate the average monthly payroll costs amount (divide the amount from 

Step 1 by 12).

• Step 3: Multiply the average monthly payroll costs amount from Step 2 by 2.5.

• Step 4: Add the outstanding amount of any EIDL made between January 31, 2020 

and April 3, 2020 that you seek to refinance, less the amount of any advance under an 

EIDL COVID-19 loan (because it does not have to be repaid).

Your 2019 IRS Form 1040 Schedule C, IRS Form 941 and state quarterly wage 

unemployment insurance tax reporting form from each quarter (or equivalent payroll 

processor records or IRS Wage and Tax Statements), along with documentation of any 

retirement or health insurance contributions, must be provided to substantiate the appliedfor PPP loan amount. A payroll statement or similar documentation from the pay period 

that covered February 15, 2020 must be provided to establish you were in operation and 

had employees on that date.
As of June 26, 2020

3. Question: I am a self-employed individual who reports my income on IRS Form 1040 

Schedule F. What documentation must I provide in place of Schedule C and how should 

my maximum loan amount be determined (up to $10 million)?

Answer: Self-employed farmers (i.e., those who report their net farm profit on IRS Form 

1040 Schedule 1 and Schedule F) should use IRS Form 1040 Schedule F in lieu of 

Schedule C, and Schedule F line 34 net farm profit should be used to determine their loan 

amount in place of Schedule C line 31 net profit. The calculation is otherwise the same 

as for Schedule C filers above. The 2019 IRS Form 1040 Schedule 1 and Schedule F 

must be included with the loan application.

4. Question: How do partnerships apply for PPP loans and how is the maximum PPP loan 

amount calculated for partnerships (up to $10 million)? Should partners’ selfemployment income be included on the business entity level PPP loan application or on 

separate PPP loan applications for each partner? (Note that PPP loan forgiveness 

amounts will depend, in part, on the total amount spent during the 24-week period 

following the first disbursement of the PPP loan.)

Answer: The following methodology should be used to calculate the maximum amount 

that can be borrowed for partnerships (partners’ self-employment income should be 

included on the partnership’s PPP loan application, individual partners may not apply for 

separate PPP loans):

• Step 1: Compute 2019 payroll costs by adding the following:

o 2019 Schedule K-1 (IRS Form 1065) Net earnings from self-employment of 

individual U.S. based general partners that are subject to self-employment tax, 

computed from box 14a (reduced by any section 179 expense deduction 

claimed, unreimbursed partnership expenses claimed, and depletion claimed 

on oil and gas properties) multiplied by 0.9235,2 up to $100,000 per partner (if 

2019 schedules have not been filed, fill them out);

o 2019 gross wages and tips paid to your employees whose principal place of 

residence is in the United States, if any, which can be computed using 2019 

IRS Form 941 Taxable Medicare wages & tips (line 5c-column 1) from each 

quarter plus any pre-tax employee contributions for health insurance or other 

fringe benefits excluded from Taxable Medicare wages & tips, subtracting any 

amounts paid to any individual employee in excess of $100,000 and any 

amounts paid to any employee whose principal place of residence is outside 

the U.S;

o 2019 employer contributions for employee health insurance, if any (portion of 

IRS Form 1065 line 19 attributable to health insurance);

o 2019 employer contributions to employee retirement plans, if any (IRS Form 

1065 line 18); and

2 This treatment follows the computation of self-employment tax from IRS Form 1040 Schedule SE Section A line 4 

and removes the “employer” share of self-employment tax, consistent with how payroll costs for employees in the 

partnership are determined.
As of June 26, 2020

o 2019 employer state and local taxes assessed on employee compensation, 

primarily state unemployment insurance tax (from state quarterly wage 

reporting forms), if any.

• Step 2: Calculate the average monthly payroll costs (divide the amount from Step 1 

by 12).

• Step 3: Multiply the average monthly payroll costs from Step 2 by 2.5.

• Step 4: Add any outstanding amount of any EIDL made between January 31, 2020 

and April 3, 2020 that you seek to refinance, less the amount of any advance under an 

EIDL COVID-19 loan (because it does not have to be repaid).

The partnership’s 2019 IRS Form 1065 (including K-1s) and other relevant supporting 

documentation if the partnership has employees, including the 2019 IRS Form 941 and 

state quarterly wage unemployment insurance tax reporting form from each quarter (or 

equivalent payroll processor records or IRS Wage and Tax Statements) along with 

records of any retirement or health insurance contributions, must be provided to 

substantiate the applied-for PPP loan amount. If the partnership has employees, a payroll 

statement or similar documentation from the pay period that covered February 15, 2020 

must be provided to establish the partnership was in operation and had employees on that 

date. If the partnership has no employees, an invoice, bank statement, or book of record 

establishing the partnership was in operation on February 15, 2020 must instead be 

provided.

5. Question: How is the maximum PPP loan amount calculated for S corporations and 

C corporations (up to $10 million)? (Note that PPP loan forgiveness amounts will

depend, in part, on the total amount spent during the 24-week period following the first 

disbursement of the PPP loan.)

Answer: The following methodology should be used to calculate the maximum amount 

that can be borrowed for corporations, including S and C corporations:

• Step 1: Compute 2019 payroll costs by adding the following:

o 2019 gross wages and tips paid to your employees whose principal place of 

residence is in the United States, which can be computed using 2019 IRS 

Form 941 Taxable Medicare wages & tips (line 5c-column 1) from each 

quarter plus any pre-tax employee contributions for health insurance or other 

fringe benefits excluded from Taxable Medicare wages & tips, subtracting any 

amounts paid to any individual employee in excess of $100,000 and any 

amounts paid to any employee whose principal place of residence is outside 

the U.S;

o 2019 employer health insurance contributions (portion of IRS Form 1120 line 

24 or IRS Form 1120-S line 18 attributable to health insurance);

o 2019 employer retirement contributions (IRS Form 1120 line 23 or IRS Form 

1120-S line 17); and

o 2019 employer state and local taxes assessed on employee compensation, 

primarily state unemployment insurance tax (from state quarterly wage 

reporting forms).
As of June 26, 2020

• Step 2: Calculate the average monthly payroll costs (divide the amount from Step 1 

by 12).

• Step 3: Multiply the average monthly payroll costs from Step 2 by 2.5.

• Step 4: Add the outstanding amount of any EIDL made between January 31, 2020 

and April 3, 2020 that you seek to refinance, less the amount of any advance under an 

EIDL COVID-19 loan (because it does not have to be repaid).

The corporation’s 2019 IRS Form 941 and state quarterly wage unemployment insurance 

tax reporting form from each quarter (or equivalent payroll processor records or IRS 

Wage and Tax Statements), along with the filed business tax return (IRS Form 1120 or 

IRS 1120-S) or other documentation of any retirement and health insurance contributions, 

must be provided to substantiate the applied-for PPP loan amount. A payroll statement or 

similar documentation from the pay period that covered February 15, 2020 must be 

provided to establish you were in operation and had employees on that date.

6. Question: How is the maximum PPP loan amount calculated for eligible nonprofit 

organizations3 (up to $10 million)? (Note that PPP loan forgiveness amounts will 

depend, in part, on the total amount spent during the 24-week period following the first 

disbursement of the PPP loan.)

Answer: The following methodology should be used to calculate the maximum amount 

that can be borrowed for eligible nonprofit organizations (eligible nonprofit religious 

institutions, see the next question):

• Step 1: Compute 2019 payroll costs by adding the following:

o 2019 gross wages and tips paid to your employees whose principal place of 

residence is in the United States, which can be computed using 2019 IRS 

Form 941 Taxable Medicare wages & tips (line 5c-column 1) from each 

quarter plus any pre-tax employee contributions for health insurance or other 

fringe benefits excluded from Taxable Medicare wages & tips, subtracting any 

amounts paid to any individual employee in excess of $100,000 and any 

amounts paid to any employee whose principal place of residence is outside 

the U.S;

o 2019 employer health insurance contributions (portion of IRS Form 990 Part 

IX line 9 attributable to health insurance);

o 2019 employer retirement contributions (IRS Form 990 Part IX line 8); and

o 2019 employer state and local taxes assessed on employee compensation, 

primarily state unemployment insurance tax (from state quarterly wage 

reporting forms).

• Step 2: Calculate the average monthly payroll costs (divide the amount from Step 1 

by 12).

• Step 3: Multiply the average monthly payroll costs from Step 2 by 2.5.

3 “Eligible nonprofit organization” means an organization that is described in section 501(c)(3) of the 

Internal Revenue Code of 1986 and that is exempt from taxation under section 501(a) of such Code.
As of June 26, 2020

• Step 4: Add the outstanding amount of any EIDL made between January 31, 2020 

and April 3, 2020 that you seek to refinance, less the amount of any advance under an 

EIDL COVID-19 loan (because it does not have to be repaid).

The nonprofit organization’s 2019 IRS Form 941 and state quarterly wage unemployment 

insurance tax reporting form from each quarter (or equivalent payroll processor records 

or IRS Wage and Tax Statements), along with the filed IRS Form 990 Part IX or other 

documentation of any retirement and health insurance contributions, must be provided to 

substantiate the applied-for PPP loan amount. A payroll statement or similar 

documentation from the pay period that covered February 15, 2020 must be provided to 

establish you were in operation and had employees on that date. Eligible nonprofits that 

do not file an IRS Form 990, typically those with gross receipts less than $50,000, should 

see the next question.

7. Question: How is the maximum PPP loan amount calculated for eligible nonprofit 

religious institutions, veterans organizations, and tribal businesses (up to $10 million)? 

(Note that PPP loan forgiveness amounts will depend, in part, on the total amountspent 

during the 24-week period following the first disbursement of the PPP loan.)

Answer: The following methodology should be used to calculate the maximum amount 

that can be borrowed for eligible nonprofit religious institutions, veterans organizations 

and tribal businesses:

• Step 1: Compute 2019 payroll costs by adding the following:

o 2019 gross wages and tips paid to your employees whose principal place of 

residence is in the United States, which can be computed using 2019 IRS 

Form 941 Taxable Medicare wages & tips (line 5c-column 1) from each 

quarter plus any pre-tax employee contributions for health insurance or other 

fringe benefits excluded from Taxable Medicare wages & tips, subtracting any 

amounts paid to any individual employee in excess of $100,000 and any 

amounts paid to any employee whose principal place of residence is outside 

the U.S;

o 2019 employer health insurance contributions;

o 2019 employer retirement contributions and

o 2019 employer state and local taxes assessed on employee compensation, 

primarily state unemployment insurance tax (from state quarterly wage 

reporting forms).

• Step 2: Calculate the average monthly payroll costs (divide the amount from Step 1 

by 12).

• Step 3: Multiply the average monthly payroll costs from Step 2 by 2.5.

• Step 4: Add any outstanding amount of any EIDL made between January 31, 2020 

and April 3, 2020 that you seek to refinance, less the amount of any advance under an 

EIDL COVID-19 loan (because it does not have to be repaid).

The entity’s 2019 IRS Form 941 and state quarterly wage unemployment insurance tax 

reporting form from each quarter (or equivalent payroll processor records or IRS Wage 

and Tax Statements), along with documentation of any retirement and health insurance
As of June 26, 2020

contributions, must be provided to substantiate the applied-for PPP loan amount. A 

payroll statement or similar documentation from the pay period that covered February 15, 

2020 must be provided to establish you were in operation and had employees on that 

date.

8. Question: I am an LLC owner. Which set of instructions apply to me?

Answer: LLCs should follow the instructions that apply to their tax filing situation, for 

example, whether they file as a sole proprietor, a partnership, or a corporation.

9. Question: What other documentation can be provided for the purpose of substantiating 

the applied-for PPP loan amount?

Answer: IRS Form W-2s and IRS Form W-3 or payroll processor reports, including 

quarterly and annual tax reports, can be used in place of IRS Form 941. Additionally, 

very small businesses that file an annual IRS Form 944 instead of quarterly IRS Form 

941 should rely on and provide IRS Form 944. Similarly, records from a retirement 

administrator can be used to document employer retirement contributions while records 

from a health insurance company or third-party administrator for a self-insured plan can 

document employer health insurance contributions.1

10. Question: I am self-employed and was in operation on February 15, 2020, but was not in 

operation between February 15, 2019, and June 30, 2019. I will file a Form 1040 

Schedule C or Schedule F for 2020. What is my maximum PPP loan amount?

Answer: In this case, your maximum PPP loan amount is generally equal to 2.5 times 

your average monthly payroll costs incurred in January and February 2020, plus the 

outstanding amount of any EIDL loan received between January 31, 2020, and April 3, 

2020, that will be refinanced by the PPP loan.

The following methodology should be used to calculate the maximum amount that you 

can borrow:

• Step 1: Fill out an IRS Form 1040 Schedule C (or Schedule F, if applicable) for 

January and February 2020. The entries on the schedule must reflect all business 

income and expenses from those two months, with the exception that on Schedule 

C line 13 (or Schedule F line 14):

o you must include only 1/6 of the amount of any annual depreciation and 

section 179 expense deduction attributable to investment made in those 

months, and

o you must include 1/6 of the amount of the 2020 depreciation deduction 

attributable to investment made in prior years. 

• Step 2: Take the net profit amount for January and February on Schedule C line 31 

(or Schedule F line 34). If this amount is more than $16,667 for the two months 

combined, set it to $16,667.

 1 Questions 1 – 9 published April 24, 2020. Questions 1, 2, 4, 5, 6 and 7 revised on June 26, 2020 by changing “eightweek” to “24-week.” The Paycheck Protection Program Flexibility Act of 2020, which became law on June 5, 2020, 

extended the covered period for loan forgiveness from eight weeks after the date of loan disbursement to 24 weeks 

after the date of loan disbursement, providing substantially greater flexibility for borrowers to qualify for loan 

forgiveness. The 24-week period applies to all borrowers, but borrowers that received an SBA loan number before 

June 5, 2020, have the option to use an eight-week period.
As of June 26, 2020

• Step 3: If you have employees, add your employee payroll costs for January and 

February 2020 to the result in Step 2. Only include payroll costs for those 

employees whose principal place of residence is in the United States and up to 

$16,667 of cash compensation per employee.

• Step 4: Divide the total by 2, and then multiply it by 2.5.

• Step 5: Add the outstanding amount of any EIDL made between January 31, 2020 

and April 3, 2020 that you seek to refinance, less the amount of any advance under 

an EIDL COVID-19 loan (because it does not have to be repaid).

Your IRS Form 1040 Schedule C (or Schedule F, if applicable) as completed must be 

provided to your lender when you apply for a PPP loan. This information should be 

consistent with what you will submit to the IRS and must be true and accurate in all 

material respects. You must also supply bank statements from your business account(s) 

for the months of January and February 2020 to substantiate your net profit amount 

from Schedule C or F, as applicable. If you have employees, you also must provide 

payroll records from those two months and your IRS Form 941 for the first quarter of 

2020.2

 2 Question 10 published June 26, 2020.