Treasury Clarifies PPP Loan Size and Eligibility Criteria

The Treasury released a new FAQ last night that clarifies certain areas of the Paycheck Protection Program (PPP) under Section 1102 of the Coronavirus Aid, Relief and Economic Security (CARES) Act.

The FAQ changes some key areas of guidance previously received from the U.S. Small Business Administration and participating financial institutions, but it also signals some very encouraging news for businesses and nonprofits seeking relief from COVID-19 losses.

Calculating payroll costs

  • The FAQ specifies that the $100,000 cap on payroll costs used to calculate the PPP loan size applies to salary costs only. This means that a wider range of employees can be factored into the loan size calculation than originally believed, since healthcare benefits, retirement benefits and other compensation do not need to be factored into the cap.For example, if an employee earned $90,000 and has $20,000 in employer-funded healthcare and retirement benefits, that individual would be included at $110,000 in the calculation of payroll costs that determines your maximum loan size.
  • With respect to Professional Employer Organizations (PEOs), the FAQ states that “payroll documentation provided by the payroll provider that indicates the amount of wages and payroll taxes reported to the IRS by the payroll provider for the borrower’s employees will be considered acceptable PPP loan payroll documentation” and, accordingly, those costs should be included in the employer’s payroll cost computation to determine loan size.These payroll costs include gross salary and other PPP includable payroll costs like employer-paid healthcare and retirement costs that are paid to employees utilizing a PEO structure. Administrative and other fees paid to a PEO should not be included in the payroll cost computation to determine loan size.
  • The FAQ also confirms our interpretation that independent contractor costs should not be included in an employer payroll cost accumulation for the loan size calculation.
  • The FAQ suggests that the payroll cost accumulation should start with gross wages and not be reduced for federal income or employment taxes for purposes of accumulating payroll costs for the loan size calculation.

Calculating number of employees

The FAQ suggests that borrowers may use the employee count from either 2019 or last 12 months (LTM) from application date to determine eligibility for the PPP and to accumulate payroll costs for the loan size calculation. This flexibility will allow more providers to be eligible to participate in the PPP program.

Previously submitted applications

Recognizing that this FAQ contradicts previously released guidance, the FAQ suggests that, if your loan application has already been submitted but not yet processed, you and your lender may request an amendment to your loan application.

Click here to read the full Treasury FAQ.

For more information on understanding and meeting the requirements of the Payment Protection Program and other sources of COVID-19 relief, please contact your Grassi advisor or our Crisis Response & Recovery hotline at 212.223.6216 or