Paycheck Protection Program (PPP) Loan Calculator
Enter your average monthly payroll costs to calculate the maximum PPP loan amount your business could qualify for, then switch to the Forgiveness tab to estimate how much of the loan would be forgiven based on how you spend the proceeds. The calculator covers both First Draw and Second Draw rules, the 2.5x and 3.5x multipliers, the $100,000 per-employee annual compensation cap, and the 60/40 payroll-to-non-payroll spending requirement.
How the PPP loan amount is calculated
The SBA used a five-step formula to determine how much a business could borrow. First, add up all payroll costs paid over the prior 12 months: wages, salaries, commissions, tips, paid leave, group health insurance premiums, retirement contributions, and state and local payroll taxes (federal payroll taxes are excluded). Second, subtract any compensation paid to a single employee above $100,000 per year. Third, divide the result by 12 to get average monthly payroll. Fourth, multiply by 2.5 (or 3.5 for accommodation and food service businesses applying for a Second Draw). Fifth, cap the result at $10,000,000 for First Draw loans or $2,000,000 for Second Draw loans. Seasonal businesses could choose the most favorable 12-week window from February 15 to December 31, 2019, or March 1 to June 30, 2019.
How PPP loan forgiveness works
Borrowers could apply for forgiveness of the entire principal if they met three conditions. First, they had to spend the loan proceeds on eligible costs: payroll, rent or lease payments, utility bills, and mortgage interest on pre-existing obligations. Second, at least 60% of the forgiven amount had to come from payroll costs; spending less on payroll did not disqualify forgiveness entirely, but it capped the forgivable amount at payroll costs divided by 0.60. Third, the business had to maintain its average full-time equivalent headcount compared with either the February 15 to June 30, 2019, period or the January 1 to February 29, 2020, period. A drop in FTEs reduced the forgivable amount proportionally (current FTEs divided by reference FTEs). Some exemptions applied for employees who refused rehire offers or quit voluntarily. The PPP Flexibility Act of 2020 extended the standard covered period from 8 weeks to 24 weeks.
First Draw versus Second Draw loans
First Draw loans were available to businesses that had not previously received a PPP loan, with a ceiling of $10,000,000 and a multiplier of 2.5 times average monthly payroll. Second Draw loans, introduced in January 2021, were available to borrowers who had fully spent their First Draw loan. They carried a lower cap of $2,000,000 and required the borrower to demonstrate at least a 25% drop in gross receipts in any quarter of 2020 compared with the same quarter of 2019. Businesses in the accommodation and food service sectors (NAICS codes starting with 72) could use a multiplier of 3.5 on their Second Draw, reflecting the especially severe impact of the pandemic on hospitality.
What happens to the unforgiven balance
Any portion of the loan that is not forgiven becomes a standard SBA loan carrying a 1% annual interest rate. Loans made before June 5, 2020, have a 2-year maturity; loans made on or after June 5, 2020, have a 5-year maturity. Both lender and borrower can agree to extend a 2-year loan to 5 years. The monthly payment on the unforgiven balance is calculated using the standard amortizing payment formula: principal times the monthly rate, divided by one minus the factor (1 + monthly rate) raised to the power of negative number of months. The chart above shows how a 5-year repayment schedule looks for the estimated unforgiven portion of your loan at the 1% rate.
PPP loan and forgiveness quick reference
| Rule | First Draw | Second Draw |
|---|---|---|
| Payroll multiplier | 2.5x average monthly payroll | 2.5x (3.5x for NAICS 72) |
| Maximum loan amount | $10,000,000 | $2,000,000 |
| Minimum payroll share for full forgiveness | 60% | 60% |
| Maximum non-payroll share | 40% | 40% |
| Standard covered period | 24 weeks | 24 weeks |
| Interest rate | 1% per year | 1% per year |
| Loan term (unforgiven balance) | 5 years | 5 years |
| Revenue reduction test required? | No | Yes (25% drop in any 2020 quarter vs 2019) |
| Employee headcount limit | 500 employees | 300 employees |
Key rules from the CARES Act, the PPP Flexibility Act of 2020, and SBA guidance.
Frequently asked questions
Is the PPP program still open for new applications?
No. The Paycheck Protection Program closed to new applicants on May 31, 2021. The program disbursed more than $800 billion across approximately 11.5 million loans during 2020 and 2021. Businesses can no longer apply, but borrowers who received loans can still submit forgiveness applications through their lender or through the SBA's direct forgiveness portal if they have not yet done so.
What payroll costs were eligible for PPP?
Eligible payroll costs included gross wages, salaries, commissions, and tips paid to US-based employees; payments for vacation, parental, family, medical, and sick leave; allowances for separation or dismissal; employer-paid premiums for group health insurance; employer contributions to employee retirement plans; and state and local payroll taxes assessed on employee compensation. Federal payroll taxes (Social Security, Medicare, and FUTA) were excluded from eligible costs. Compensation above $100,000 per year per employee was also excluded.
What is the 60/40 rule for PPP forgiveness?
The PPP Flexibility Act of 2020 required that at least 60% of the forgiven amount come from payroll costs. If a borrower spent less than 60% of the loan on payroll, forgiveness was not eliminated entirely; it was capped at total payroll costs divided by 0.60. For example, if a borrower received a $200,000 loan and spent only $90,000 on payroll (45%), the forgiveness ceiling under the payroll rule would be $90,000 divided by 0.60, or $150,000, rather than the full $200,000. The remaining $50,000 would be repayable.
How does the FTE reduction penalty work?
If a borrower's average full-time equivalent employee count during the covered period fell below the average in the chosen reference period, the forgiveness amount was reduced proportionally. The reduction factor is the covered-period FTE average divided by the reference-period FTE average, capped at 1.0. For example, if a company had 20 FTEs in the reference period but only 16 during the covered period, the FTE quotient is 16 divided by 20, or 0.80, and total forgivable costs are multiplied by 0.80. Safe harbors existed for employees who were offered rehire but declined and for businesses that restored headcount by December 31, 2020.
Why do NAICS 72 businesses get a 3.5x multiplier?
Accommodation and food service businesses (those with NAICS codes beginning with 72, including hotels, restaurants, bars, and catering companies) were uniquely hard hit by pandemic-era restrictions on indoor dining and travel. The Consolidated Appropriations Act of 2021, which authorized Second Draw PPP loans, gave NAICS 72 businesses a higher multiplier of 3.5 times average monthly payroll instead of the standard 2.5x. The cap remained $2,000,000 per borrower.
Is PPP loan forgiveness taxable income?
No. The Consolidated Appropriations Act of 2021 clarified that forgiven PPP loan amounts are excluded from gross income for federal income tax purposes. The expenses paid with the forgiven funds also remain fully deductible. Some states initially did not conform to this federal treatment, so you should verify your state's specific tax rules with a qualified tax advisor.