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PAYCHECK PROTECTION PROGRAM

Frequently Asked Questions (FAQs) on PPP Loan Forgiveness

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

is providing this guidance to address borrower and lender questions concerning forgiveness of 

Paycheck Protection Program (PPP) loans, as provided for under section 1106 of the Coronavirus 

Aid, Relief, and Economic Security Act (CARES Act), as amended by the Paycheck Protection 

Program Flexibility Act (Flexibility Act).

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

interpretation, in consultation with the Department of the Treasury, of the CARES Act, the 

Flexibility Act, and the Paycheck Protection Program Interim Final Rules (“PPP Interim Final 

Rules”) (link).

General Loan Forgiveness FAQs 

1. Question: Which loan forgiveness application should sole proprietors, independent 

contractors, or self-employed individuals with no employees complete? 

Answer: Sole proprietors, independent contractors, and self-employed individuals who 

had no employees at the time of the PPP loan application and did not include any 

employee salaries in the computation of average monthly payroll in the Borrower 

Application Form automatically qualify to use the Loan Forgiveness Application Form 

3508EZ or lender equivalent and should complete that application.

2. Question: Can PPP lenders use scanned copies of documents, E-signatures, or Econsents for loan forgiveness applications and loan forgiveness documentation? 

Answer: Yes. All PPP lenders may accept scanned copies of signed loan forgiveness 

applications and documents containing the information and certifications required by 

SBA Form 3508, 3508EZ, or lender equivalent. Lenders may accept any form of Econsent or E-signature that complies with the requirements of the Electronic Signatures in 

Global and National Commerce Act (P.L. 106-229). 

If electronic signatures are not feasible, then when obtaining a wet ink signature without 

in-person contact, lenders should take appropriate steps to ensure the proper party has 

executed the document. 

This guidance does not supersede signature requirements imposed by other applicable 

law, including by the lender’s primary federal regulator.

3. Question: If a borrower submits a timely loan forgiveness application, does the 

borrower have to make any payments on its loan prior to SBA remitting the forgiveness 

amount, if any?

Answer: As long as a borrower submits its loan forgiveness application within ten 

months of the completion of the Covered Period (as defined below), the borrower is not 
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required to make any payments until the forgiveness amount is remitted to the lender by 

SBA. If the loan is fully forgiven, the borrower is not responsible for any payments. If 

only a portion of the loan is forgiven, or if the forgiveness application is denied, any 

remaining balance due on the loan must be repaid by the borrower on or before the 

maturity date of the loan. Interest accrues during the time between the disbursement of 

the loan and SBA remittance of the forgiveness amount. The borrower is responsible for 

paying the accrued interest on any amount of the loan that is not forgiven. The lender is 

responsible for notifying the borrower of remittance by SBA of the loan forgiveness 

amount (or that SBA determined that no amount of the loan is eligible for forgiveness) 

and the date on which the borrower’s first payment is due, if applicable.

4. Question: The PPP loan forgiveness application forms (3508, 3508EZ, and 3508S) 

display an expiration date of 10/31/2020 in the upper-right corner. Is October 31, 2020 

the deadline for borrowers to apply for forgiveness?

Answer: No. Borrowers may submit a loan forgiveness application any time before the 

maturity date of the loan, which is either two or five years from loan origination. 

However, if a borrower does not apply for loan forgiveness within 10 months after the 

last day of the borrower’s loan forgiveness covered period, loan payments are no longer 

deferred and the borrower must begin making payments on the loan. For example, a 

borrower whose covered period ends on October 30, 2020 has until August 30, 2021 to 

apply for forgiveness before loan repayment begins. 

The expiration date in the upper-right corner of the posted PPP loan forgiveness 

application forms is displayed for purposes of SBA’s compliance with the Paperwork 

Reduction Act, and reflects the temporary expiration date for approved use of the forms. 

This date will be extended, and when approved, the same forms with the new expiration 

date will be posted.1

 

Loan Forgiveness Payroll Costs FAQs

1. Question: Are payroll costs that were incurred during the Covered Period2 or the 

Alternative Payroll Covered Period3 but paid after the Covered Period or the Alternative 

Payroll Covered Period eligible for loan forgiveness?

 1 All questions and answers published August 4, 2020 unless specified otherwise. General Loan Forgiveness FAQ 4 

published October 13, 2020.

2 The Covered Period is either (1) the 24-week (168-day) period beginning on the PPP loan disbursement date, or

(2) if the borrower received its PPP loan before June 5, 2020, the borrower may elect to use an eight-week (56-day) 

Covered Period. For example, if the borrower is using a 24-week Covered Period and received its PPP loan 

proceeds on Monday, April 20, the first day of the Covered Period is April 20 and the last day of the Covered Period 

is Sunday, October 4. In no event may the Covered Period extend beyond December 31, 2020. 3 Borrowers with a biweekly (or more frequent) payroll schedule may elect to calculate eligible payroll costs using 

the 24-week (168-day) period (or for loans received before June 5, 2020 at the election of the borrower, the eightweek (56-day) period) that begins on the first day of their first pay period following their PPP loan disbursement 

date (i.e., the “Alternative Covered Period”). For example, if the borrower is using a 24-week Alternative Payroll 

Covered Period and received its PPP loan proceeds on Monday, April 20, and the first day of its first pay period 
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Answer: Yes, if the payroll costs are paid on or before the next regular payroll date after 

the Covered Period or Alternative Payroll Covered Period.

Example: A borrower received its loan before June 5, 2020 and elects to use a 24-week 

Covered Period. The borrower’s Covered Period runs from Monday, April 20 through 

Sunday, October 4. The borrower has a biweekly payroll cycle, with a pay period 

ending on Sunday, October 4. However, the borrower will not make the corresponding 

payroll payment until the next regular payroll date of Friday, October 9. Under these 

circumstances, the borrower incurred payroll costs during the Covered Period and may 

seek loan forgiveness for the payroll costs paid on October 9 because the cost was 

incurred during the Covered Period and payment was made on the first regular payroll 

date after the Covered Period. 

2. Question: Are payroll costs that were incurred before the Covered Period but paid 

during the Covered Period eligible for loan forgiveness?

Answer: Yes.

Example: A borrower received its loan before June 5, 2020 and elects to use a 24-week 

Covered Period. The borrower’s Covered Period runs from Monday, April 20 through 

Sunday, October 4. The borrower has a biweekly payroll cycle, with a payroll cycle 

ending on Saturday, April 18. The borrower will not make the corresponding payroll 

payment until Friday, April 24. While these payroll costs were not incurred during the 

Covered Period, they were paid during the Covered Period and are therefore eligible for 

loan forgiveness.

3. Question: Are borrowers required to calculate payroll costs for partial pay periods?

Answer: If the borrower uses a biweekly or more frequent (e.g., weekly) payroll cycle, 

the borrower may elect to calculate eligible payroll costs using the eight-week (for 

borrowers that received their loans before June 5, 2020 and elect this Covered Period 

length) or 24-week period that begins on the first day of the first payroll cycle following 

the PPP Loan Disbursement Date (referred to as the Alternative Payroll Covered Period). 

However, if a borrower pays twice a month or less frequently, it will need to calculate 

payroll costs for partial pay periods. The Covered Period or Alternative Covered Period 

for any borrower will end no later than December 31, 2020.

Example: A borrower uses a biweekly payroll cycle. The borrower’s 24-week Covered 

Period begins on Monday, June 1 and ends on Sunday, November 15. The first day of 

the borrower’s first payroll cycle that starts in the Covered Period is June 7. The 

borrower may elect an Alternative Payroll Covered Period that starts on June 7 and ends 

on November 21 (167 days later). Payroll costs incurred (i.e., the pay was earned on that 

 

following its PPP loan disbursement is Sunday, April 26, the first day of the Alternative Payroll Covered Period is 

April 26 and the last day of the Alternative Payroll Covered Period is Saturday, October 10. In no event may the 

Alternative Payroll Covered Period extend beyond December 31, 2020.
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day) during this Alternative Payroll Covered Period are eligible for loan forgiveness if 

the last payment is made on or before the first regular payroll date after November 21.

4. Question: For purposes of calculating cash compensation, should borrowers use the 

gross amount before deductions for taxes, employee benefits payments, and similar 

payments, or the net amount paid to employees?

Answer: The gross amount should be used when calculating cash compensation.

5. Question: Are only salaries or wages covered by loan forgiveness, or can a borrower

pay lost tips, lost commissions, bonuses, or other forms of incentive pay and have such 

costs qualify for loan forgiveness?

Answer: Payroll costs include all forms of cash compensation paid to employees, 

including tips, commissions, bonuses, and hazard pay. Note that forgivable cash 

compensation per employee is limited to $100,000 on an annualized basis.

6. Question: What expenses for group health care benefits will be considered payroll costs 

that are eligible for loan forgiveness? 

Answer: Employer expenses for employee group health care benefits that are paid or 

incurred by the borrower during the Covered Period or the Alternative Payroll Covered 

Period are payroll costs eligible for loan forgiveness. However, payroll costs do not 

include expenses for group health care benefits paid by employees (or beneficiaries of the 

plan) either pre-tax or after tax, such as the employee share of their health care premium. 

Forgiveness is not provided for expenses for group health benefits accelerated from 

periods outside the Covered Period or Alternative Payroll Covered Period.

If a borrower has an insured group health plan, insurance premiums paid or incurred 

during the Covered Period or Alternative Payroll Covered Period qualify as “payroll 

costs,” as long as the premiums are paid during the applicable period or by the next 

premium due date after the end of the applicable period. As noted, only the portion of the 

premiums paid by the borrower for coverage during the applicable Covered Period or 

Alternative Payroll Covered Period is included, not any portion paid by employees or 

beneficiaries or any portion paid for coverage for periods outside the applicable period. 

Loan Forgiveness Payroll Costs FAQ 8 outlines the rules that apply to owner health 

insurance.

7. Question: What contributions for retirement benefits will be considered payroll costs 

that are eligible for loan forgiveness? 

Answer: Generally, employer contributions for employee retirement benefits that are 

paid or incurred by the borrower during the Covered Period or Alternative Payroll 

Covered Period qualify as “payroll costs” eligible for loan forgiveness. The employer 

contributions for retirement benefits included in the loan forgiveness amount as payroll 

costs cannot include any retirement contributions deducted from employees’ pay or 

otherwise paid by employees. Forgiveness is not provided for employer contributions for 
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retirement benefits accelerated from periods outside the Covered Period or Alternative 

Covered Period. Loan Forgiveness Payroll Costs FAQ 8 outlines the treatment of 

retirement benefits for owners, which are different from this general approach.

8. Question: How is the amount of owner compensation that is eligible for loan 

forgiveness determined?

Answer: The amount of compensation of owners who work at their business that is 

eligible for forgiveness depends on the business type and whether the borrower is using 

an eight-week or 24-week Covered Period. In addition to the specific caps described 

below, the amount of loan forgiveness requested for owner-employees and self-employed 

individuals’ payroll compensation is capped at $20,833 per individual in total across all 

businesses in which he or she has an ownership stake. For borrowers that received a PPP 

loan before June 5, 2020 and elect to use an eight-week Covered Period, this cap is 

$15,385. If their total compensation across businesses that receive a PPP loan exceeds 

the cap, owners can choose how to allocate the capped amount across different 

businesses. The examples below are for a borrower using a 24-week Covered Period.

C Corporations: The employee cash compensation of a C-corporation owner-employee, 

defined as an owner who is also an employee (including where the owner is the only 

employee), is eligible for loan forgiveness up to the amount of 2.5/12 of his or her 2019 

employee cash compensation, with cash compensation defined as it is for all other 

employees. Borrowers are also eligible for loan forgiveness for payments for employer 

state and local taxes paid by the borrowers and assessed on their compensation, for the 

amount paid by the borrower for employer contributions for their employee health 

insurance, and for employer retirement contributions to their employee retirement plans

capped at the amount of 2.5/12 of the 2019 employer retirement contribution. Payments 

other than for cash compensation should be included on lines 6-8 of PPP Schedule A of 

the loan forgiveness application (SBA Form 3508 or lender equivalent), for borrowers 

using that form, and do not count toward the $20,833 cap per individual.

S Corporations: The employee cash compensation of an S-corporation owner-employee, 

defined as an owner who is also an employee, is eligible for loan forgiveness up to the 

amount of 2.5/12 of their 2019 employee cash compensation, with cash compensation 

defined as it is for all other employees. Borrowers are also eligible for loan forgiveness 

for payments for employer state and local taxes paid by the borrowers and assessed on 

their compensation, and for employer retirement contributions to their employee 

retirement plans capped at the amount of 2.5/12 of their 2019 employer retirement 

contribution. Employer contributions for health insurance are not eligible for additional 

forgiveness for S-corporation employees with at least a 2% stake in the business, 

including for employees who are family members of an at least 2% owner under the 

family attribution rules of 26 U.S.C. 318, because those contributions are included in 

cash compensation. The eligible non-cash compensation payments should be included on 

lines 7 and 8 of PPP Schedule A of the Loan Forgiveness Application (SBA Form 3508), 

for borrowers using that form, and do not count toward the $20,833 cap per individual.
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Self-employed Schedule C (or Schedule F) filers: The compensation of self-employed 

Schedule C (or Schedule F) individuals, including sole proprietors, self-employed 

individuals, and independent contractors, that is eligible for loan forgiveness is limited to 

2.5/12 of 2019 net profit as reported on IRS Form 1040 Schedule C line 31 (or 2.5/12 of 

2019 net farm profit, as reported on IRS Form 1040 Schedule F line 34) (or for new 

businesses, the estimated 2020 Schedule C (or Schedule F) referenced in question 10 of 

“Paycheck Protection Program: How to Calculate Maximum Loan Amounts – By 

Business Type”4). Separate payments for health insurance, retirement, or state or local 

taxes are not eligible for additional loan forgiveness; health insurance and retirement 

expenses are paid out of their net self-employment income. If the borrower did not 

submit its 2019 IRS Form 1040 Schedule C (or F) to the Lender when the borrower 

initially applied for the loan, it must be included with the borrower’s forgiveness 

application. 

General Partners: The compensation of general partners that is eligible for loan 

forgiveness is limited to 2.5/12 of their 2019 net earnings from self-employment that is 

subject to self-employment tax, which is computed from 2019 IRS Form 1065 Schedule 

K-1 box 14a (reduced by box 12 section 179 expense deduction, unreimbursed 

partnership expenses deducted on their IRS Form 1040 Schedule SE, and depletion 

claimed on oil and gas properties) multiplied by 0.9235.5 Compensation is only eligible 

for loan forgiveness if the payments to partners are made during the Covered Period or 

Alternative Payroll Covered Period. Separate payments for health insurance, retirement, 

or state or local taxes are not eligible for additional loan forgiveness. If the partnership 

did not submit its 2019 IRS Form 1065 K-1s when initially applying for the loan, it must

be included with the partnership’s forgiveness application.

LLC owners: LLC owners must follow the instructions that apply to how their business 

was organized for tax filing purposes for tax year 2019, or if a new business, the expected 

tax filing situation for 2020. 

Loan Forgiveness Nonpayroll Costs FAQs

1. Question: Are nonpayroll costs incurred prior to the Covered Period, but paid during 

the Covered Period, eligible for loan forgiveness?

Answer: Yes, eligible business mortgage interest costs, eligible business rent or lease 

costs, and eligible business utility costs incurred prior to the Covered Period and paid 

during the Covered Period are eligible for loan forgiveness. 

Example: A borrower’s 24-week Covered Period runs from April 20 through October 4. 

On May 4, the borrower receives its electricity bill for April. The borrower pays its 

April electricity bill on May 8. Although a portion of the electricity costs were incurred 

 4 https://www.sba.gov/sites/default/files/2020-06/How-to-Calculate-Loan-Amounts-508_1.pdf. 5 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.
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before the Covered Period, these electricity costs are eligible for loan forgiveness 

because they were paid during the Covered Period. 

2. Question: Are nonpayroll costs incurred during the Covered Period, but paid after the 

Covered Period, eligible for loan forgiveness?

Answer: Nonpayroll costs are eligible for loan forgiveness if they were incurred during 

the Covered Period and paid on or before the next regular billing date, even if the billing 

date is after the Covered Period.

Example: A borrower’s 24-week Covered Period runs from April 20 through October 4. 

On October 6, the borrower receives its electricity bill for September. The borrower 

pays its September electricity bill on October 16. These electricity costs are eligible for 

loan forgiveness because they were incurred during the Covered Period and paid on or 

before the next regular billing date (November 6).

3. Question: If a borrower elects to use the Alternative Payroll Covered Period for payroll 

costs, does the Alternative Payroll Covered Period apply to nonpayroll costs? 

Answer: No. The Alternative Payroll Covered Period applies only to payroll costs, not 

to nonpayroll costs. The Covered Period always starts on the date the lender makes a

disbursement of the PPP loan. Nonpayroll costs must be paid or incurred during the 

Covered Period to be eligible for loan forgiveness. For payroll costs only, the borrower 

may elect to use the Alternative Payroll Covered Period to align with its biweekly or 

more frequent payroll schedule.

4. Question: Is interest on unsecured credit eligible for loan forgiveness? 

Answer: No. Payments of interest on business mortgages on real or personal property

(such as an auto loan) are eligible for loan forgiveness. Interest on unsecured credit is not 

eligible for loan forgiveness because the loan is not secured by real or personal property.

Although interest on unsecured credit incurred before February 15, 2020 is a permissible 

use of PPP loan proceeds, this expense is not eligible for forgiveness.

5. Question: Are payments made on recently renewed leases or interest payments on 

refinanced mortgage loans eligible for loan forgiveness if the original lease or mortgage 

existed prior to February 15, 2020?

Answer: Yes. If a lease that existed prior to February 15, 2020 expires on or after 

February 15, 2020 and is renewed, the lease payments made pursuant to the renewed 

lease during the Covered Period are eligible for loan forgiveness. Similarly, if a 

mortgage loan on real or personal property that existed prior to February 15, 2020 is 

refinanced on or after February 15, 2020, the interest payments on the refinanced 

mortgage loan during the Covered Period are eligible for loan forgiveness.

Example: A borrower entered into a five-year lease for its retail space in March 2015. 

The lease was renewed in March 2020. For purposes of determining forgiveness of the 
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borrower’s PPP loan, the March 2020 renewed lease is deemed to be an extension of the 

original lease, which was in force before February 15, 2020. As a result, the lease 

payments made under the renewed lease during the Covered Period are eligible for loan 

forgiveness.

6. Question: Covered utility payments, which are eligible for forgiveness, include a 

“payment for a service for the distribution of . . . transportation” under the CARES Act. 

What expenses does this category include?

Answer: A service for the distribution of transportation refers to transportation utility 

fees assessed by state and local governments. Payment of these fees by the borrower is 

eligible for loan forgiveness.6

7. Question: Are electricity supply charges eligible for loan forgiveness if they are charged 

separately from electricity distribution charges?

Answer: Yes. The entire electricity bill payment is eligible for loan forgiveness (even if 

charges are invoiced separately), including supply charges, distribution charges, and 

other charges such as gross receipts taxes. 

Loan Forgiveness Reductions FAQs

1. Question: Will a borrower be subject to a reduction to its forgiveness amount due to a 

reduction in FTE employees during the Covered Period if the borrower offered to rehire 

one or more laid off employees but the employees declined? 

Answer: In calculating its loan forgiveness amount, a borrower may exclude any 

reduction in FTE employees if the borrower is able to document in good faith the 

following: (1) an inability to rehire individuals who were employees of the borrower on 

February 15, 2020 and (2) an inability to hire similarly qualified individuals for unfilled 

positions on or before December 31, 2020. Borrowers are required to inform the 

applicable state unemployment insurance office of any employee’s rejected rehire offer 

within 30 days of the employee’s rejection of the offer. The documents that borrowers 

should maintain to show compliance with this exemption include the written offer to 

rehire an individual, a written record of the offer’s rejection, and a written record of 

efforts to hire a similarly qualified individual. 

2. Question: If a seasonal employer elects to use a 12-week period between May 1, 2019 

and September 15, 2019 to calculate its maximum PPP loan amount, what period in 2019 

should be used as the reference period for calculating any reductions in the loan 

forgiveness amount? 

Answer: A seasonal employer that elects to use a 12-week period between May 1, 2019 

and September 15, 2019 to calculate its maximum PPP loan amount must use the same 

 6 For more information on transportation utility fees, see 

https://www.fhwa.dot.gov/ipd/value_capture/defined/transportation_utility_fees.aspx.
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12-week period as the reference period for calculation of any reduction in the amount of 

loan forgiveness. 

3. Question: When calculating the FTE Reduction Exceptions in Table 1 of the PPP 

Schedule A Worksheet on the Loan Forgiveness Application (SBA Form 3508 or lender 

equivalent), do borrowers include employees who made more than $100,000 in 2019 

(those listed in Table 2 of the PPP Schedule A Worksheet)?

Answer: Yes. The FTE Reduction Exceptions apply to all employees, not just those 

who would be listed in Table 1 of the Loan Forgiveness Application (SBA Form 3508 or 

lender equivalent). Borrowers should therefore include employees who made more than 

$100,000 in the FTE Reduction Exception line in Table 1 of the PPP Schedule A 

Worksheet. 

4. Question: How do borrowers calculate the reduction in their loan forgiveness amount 

arising from reductions in employee salary or hourly wage?

Answer: Certain pay reductions during the Covered Period or the Alternative Payroll 

Covered Period may reduce the amount of loan forgiveness a borrower will receive. If 

the salary or hourly wage of a covered employee7 is reduced by more than 25% during 

the Covered Period or the Alternative Payroll Covered Period, the portion in excess of

25% reduces the eligible forgiveness amount unless the borrower satisfies the 

Salary/Hourly Wage Reduction Safe Harbor (as described in the Loan Forgiveness 

Application (SBA Form 3508 or lender equivalent)). The examples below assume that 

each employee is a “covered employee.” 

Example 1: A borrower received its PPP loan before June 5, 2020 and elected to use an 

eight-week covered period. Its full-time salaried employee’s pay was reduced during 

the Covered Period from $52,000 per year to $36,400 per year on April 23, 2020 and 

not restored by December 31, 2020. The employee continued to work on a full-time 

basis with a full-time equivalency (FTE) of 1.0. The borrower should refer to the 

“Salary/Hourly Wage Reduction” section under the “Instructions for PPP Schedule A

Worksheet” in the PPP Loan Forgiveness Application Instructions. In Step 1, the 

borrower enters the figures in 1.a, 1.b, and 1.c, and because annual salary was reduced 

by more than 25%, the borrower proceeds to Step 2. Under Step 2, because the salary 

reduction was not remedied by December 31, 2020, the Salary/Hourly Wage Reduction 

Safe Harbor is not met, and the borrower is required to proceed to Step 3. Under Step 

3.a., $39,000 (75% of $52,000) is the minimum salary that must be maintained to avoid 

a penalty. Salary was reduced to $36,400, and the excess reduction of $2,600 is entered 

in Step 3.b. Because this employee is salaried, in Step 3.e., the borrower would 

multiply the excess reduction of $2,600 by 8 (if it had instead selected a 24-week 

Covered Period, it would multiply by 24) and divide by 52 to arrive at a loan 

 7 A “covered employee” is an individual who: (1) was employed by the borrower at any point during the Covered 

Period or Alternative Payroll Covered Period and whose principal place of residence is in the United States; and (2) 

received compensation from the borrower at an annualized rate less than or equal to $100,000 for all pay periods in 

2019 or was not employed by the borrower at any point in 2019.
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forgiveness reduction amount of $400. The borrower would enter on the PPP Schedule 

A Worksheet, Table 1, $400 as the salary/hourly wage reduction in the column above 

box 3 for that employee. 

Example 2: A borrower received its PPP loan before June 5, 2020 and elected to use a 

24-week Covered Period. An hourly employee’s hourly wage was reduced from $20 

per hour to $15 per hour during the Covered Period. The employee worked 10 hours 

per week between January 1, 2020 and March 31, 2020. The borrower should refer to 

the “Salary/Hourly Wage Reduction” section under the “Instructions for PPP Schedule 

A Worksheet” in the PPP Loan Forgiveness Application Instructions. Because the 

employee’s hourly wage was reduced by exactly 25% (from $20 per hour to $15 per 

hour), the wage reduction does not reduce the eligible forgiveness amount. The amount 

on line 1.c would be 0.75 or more, so the borrower would enter $0 in the Salary/Hourly 

Wage Reduction column for that employee on the PPP Schedule A Worksheet, Table 1. 

If the same employee’s hourly wage had been reduced to $14 per hour, the reduction 

would be more than 25%, and the borrower would proceed to Step 2. If that reduction 

were not remedied as of December 31, 2020, the borrower would proceed to Step 3. 

This reduction in hourly wage in excess of 25% is $1 per hour. In Step 3, the borrower 

would multiply $1 per hour by 10 hours per week to determine the weekly salary 

reduction. The borrower would then multiply the weekly salary reduction by 24 

(because the borrower is using a 24-week Covered Period). The borrower would enter 

$240 in the Salary/Hourly Wage Reduction column for that employee on the PPP 

Schedule A Worksheet, Table 1. If the borrower applies for forgiveness before the end 

of the 24-week Covered Period, it must account for the salary reduction (the excess 

reduction over 25%, or $240) for the full 24-week Covered Period. 

Example 3: An employee earned a wage of $20 per hour between January 1, 2020 and 

March 31, 2020 and worked 40 hours per week. During the Covered Period, the 

employee’s wage was not changed, but his or her hours were reduced to 25 hours per 

week. In this case, the salary/hourly wage reduction for that employee is zero, because 

the hourly wage was unchanged. As a result, the borrower would enter $0 in the 

Salary/Hourly Wage Reduction column for that employee on the PPP Schedule A 

Worksheet, Table 1. The employee’s reduction in hours would be taken into account in 

the borrower’s calculation of its FTE during the Covered Period, which is calculated 

separately and may result in a reduction of the borrower’s loan forgiveness amount.

5. Question: For purposes of calculating the loan forgiveness reduction required for 

salary/hourly wage reductions in excess of 25% for certain employees, are all forms of 

compensation included or only salaries and wages?

Answer: For purposes of calculating reductions in the loan forgiveness amount, the 

borrower should only take into account decreases in salaries or wages.
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Economic Injury Disaster Loan (EIDL) FAQs

1. Question: SBA will deduct the amount of any Economic Injury Disaster Loan (EIDL) 

advance received by a PPP borrower from the forgiveness amount remitted to the 

lender. How will a lender know the amount of the EIDL advance that will be 

automatically deducted by SBA?

Answer: If a borrower received an EIDL advance, SBA is required to reduce the 

borrower’s loan forgiveness amount by the amount of the EIDL advance. SBA will 

deduct the amount of the EIDL advance from the forgiveness amount remitted by SBA to 

the lender. The lender will be able to confirm the amount of the EIDL advance that will 

be automatically deducted by SBA from the forgiveness payment by reviewing the 

borrower’s EIDL advance information in the PPP Forgiveness Platform.

2. Question: How should a lender handle any remaining balance due on a PPP loan after 

SBA remits the forgiveness amount to the lender?

Answer: If a PPP loan is not forgiven in full (including if there has been a reduction in 

the forgiveness amount for an EIDL advance), any remaining balance due on the PPP 

loan must be repaid by the borrower. The lender is responsible for notifying the borrower 

of the loan forgiveness amount remitted by SBA and the date on which the borrower’s 

first loan payment is due. The lender must continue to service the loan. The borrower 

must repay the remaining loan balance by the maturity date of the PPP loan (either two or 

five years). If a borrower is determined to have been ineligible for a PPP loan for any 

reason, SBA may seek repayment of the outstanding PPP loan balance or pursue other 

available remedies.

3. Question: What should a lender do if a borrower received an EIDL advance in excess of 

the amount of its PPP loan? 

Answer: A borrower that received an EIDL advance in excess of the amount of its PPP 

loan will not receive any forgiveness on the PPP loan, because the amount of an EIDL 

advance is deducted from the PPP loan forgiveness amount. The lender is responsible for 

notifying the borrower of the date on which the borrower’s first loan payment is 

due. The lender must continue to service the loan. The borrower must repay the 

remaining loan balance by the maturity date of the PPP loan (either two or five years). If 

a borrower is determined to have been ineligible for a PPP loan for any reason, SBA may 

seek repayment of the outstanding PPP loan balance or pursue other available remedies.8

 8 All questions and answers published August 4, 2020 unless specified otherwise. EIDL FAQs 1 – 3 published 

August 11, 2020.