The following methodology, which is one of the methodologies contained in the Act, will be most useful for many applicants.

1. Step 1: Aggregate payroll costs (defined in detail below in f.) from the last twelve months for employees whose principal place of residence is the United States.
2. Step 2: Subtract any compensation paid to an employee in excess of an annual salary of $100,000 and/or any amounts paid to an independent contractor or sole proprietor in excess of $100,000 per year.
3. Step 3: Calculate average monthly payroll costs (divide the amount from Step 2 by 12).
4. Step 4: Multiply the average monthly payroll costs from Step 3 by 2.5.
5. Step 5: Add the outstanding amount of an Economic Injury Disaster Loan (EIDL) made between January 31, 2020 and April 3, 2020, less the amount of any “advance” under an EIDL COVID-19 loan (because it does not have to be repaid).

Example 1	– No employees make more than $100,000
	Annual Payroll:	$120,000
	Average monthly payroll:	$10,000
	Multiply by 2.5:	$25,000
	Maximum loan amount is:	$25,000
Example  2	– Some employees make more than $100,000
	Annual Payroll:	$1,500,000
	Subtract compensation amounts in excess of an annual salary of $100,000:	$1,200,000
	Average monthly qualifying payroll:	$100,000
	Multiply by 2.5:	$250,000
	Maximum loan amount is:	$250,000
Example  3	– No employees make more than $100,000, outstanding EIDL loan of $10,000.
	Annual Payroll:	$120,000
	Subtract compensation amounts in excess of an annual salary of $100,000:	$10,000
	Multiply by 2.5:	$25,000
	Add EIDL loan of $10,000:	$35,000
	Maximum loan amount is:	$35,000
Example  4	Some employees make more than $100,000, outstanding EIDL loan of $10,000
	Annual Payroll:	$1,500,000
	Subtract compensation amounts in excess of an annual salary of $100,000:	$1,200,000
	Average monthly qualifying payroll:	$100,000
	Multiply by 2.5:	$250,000
	Add EIDL loan of $10,000:	$260,000
	Maximum loan amount is:	$260,000

Yes. The amount of loan forgiveness can be up to the full principal amount of the loan and any accrued interest. That is, the borrower will not be responsible for any loan payment if the borrower uses all of the loan proceeds for forgivable purposes described below and employee and compensation levels are maintained. The actual amount of loan forgiveness will depend, in part, on the total amount of payroll costs, payments of interest on mortgage obligations incurred before February 15, 2020, rent payments on leases dated before February 15, 2020, and utility payments under service agreements dated before February 15, 2020, over the eight-week period following the date of the loan. However, not more than 25 percent of the loan forgiveness amount may be attributable to non-payroll costs.

While the Act provides that borrowers are eligible for forgiveness in an amount equal to the sum of payroll costs and any payments of mortgage interest, rent, and utilities, the Administrator has determined that the non-payroll portion of the forgivable loan amount should be limited to effectuate the core purpose of the statute and ensure finite program resources are devoted primarily to payroll. The Administrator has determined in consultation with the Secretary that 75 percent is an appropriate percentage in light of the Act’s overarching focus on keeping workers paid and employed.

Further, the Administrator and the Secretary believe that applying this threshold to loan forgiveness is consistent with the structure of the Act, which provides a loan amount 75 percent of which is equivalent to eight weeks of payroll (8 weeks / 2.5 months = 56 days / 76 days = 74 percent rounded up to 75 percent). Limiting non-payroll costs to 25 percent of the forgiveness amount will align these elements of the program, and will also help to ensure that the finite appropriations available for PPP loan forgiveness are directed toward payroll protection. SBA will issue additional guidance on loan forgiveness.

No, independent contractors have the ability to apply for a PPP loan on their own so they do not count for purposes of a borrower’s PPP loan forgiveness.