Paycheck Protection Program Calculator

Understanding the Paycheck Protection Program (PPP)

The Paycheck Protection Program was a U.S. Small Business Administration (SBA) emergency lending initiative created under the CARES Act in March 2020 to help small businesses retain employees during the COVID-19 pandemic. PPP provided low-interest, potentially forgivable loans to cover payroll, rent, utilities, and other operating costs. The program closed to new applications on May 31, 2021. This calculator applies 2021 rules for historical reference only.

If you are evaluating current commercial financing options, compare term loan payments with our business loan calculator, model operating cash flow with the business budget calculator, and estimate total employee compensation costs with the employee cost calculator.

How PPP loan amounts varied by business type

Eligible loan size depended on how a business documented its payroll base during the reference period (typically calendar year 2019 or 2020):

• Sole proprietors and self-employed individuals: Net profit from IRS Schedule C, divided by 12 to get average monthly amount. No W-2 employees were required.
• Partnerships: Self-employment earnings of active partners plus employee W-2 payroll, averaged monthly.
• C corporations and S corporations: Average monthly cash compensation for employees, including salaries, wages, tips, and covered benefits. Individual employee cash compensation was capped at $100,000 annualized when computing the payroll base.

Maximum PPP loan amount formula

For most eligible small businesses, the maximum loan equaled 2.5 times average monthly payroll, subject to a program-wide cap of $10,000,000:

Businesses in accommodation and food services (NAICS Code 72) that received a Second Draw PPP loan could qualify for up to 3.5 times average monthly payroll:

PPP loan forgiveness requirements

Borrowers could apply for 100% loan forgiveness if loan proceeds were spent on eligible covered expenses during the covered period (typically 8 to 24 weeks after disbursement). At least 60% of the forgiven amount had to be spent on payroll costs. The remaining up to 40% could come from eligible non-payroll costs such as business mortgage interest, rent or lease payments, and utilities.

The SBA enforced the payroll share rule by limiting eligible non-payroll costs to 40% of total forgiven spending. Given payroll spending $P$ during the covered period, the maximum forgivable non-payroll amount was:

Total estimated forgiveness was then capped at the lesser of the original loan amount or total eligible spending:

Where $N$ is actual non-payroll spending on covered expenses. Any loan balance not forgiven became a 1% fixed-rate loan with a 2-year or 5-year maturity, depending on when the loan was issued.

Worked example

Consider a corporation with $20,000 average monthly payroll and 8 employees in a standard (non-hospitality) sector:

1. Maximum loan: $20,000 × 2.5 = $50,000
2. Payroll spent: $45,000 during the covered period
3. Non-payroll spent: $12,000 on rent and utilities
4. Eligible non-payroll cap: $45,000 × (40 ÷ 60) = $30,000. Actual spending of $12,000 is below the cap, so all $12,000 counts.
5. Estimated forgiveness: min($50,000, $45,000 + $12,000) = $50,000 (full loan forgiven)
6. Payroll share: $45,000 ÷ $57,000 = 78.9%, above the 60% minimum

Historical context and program timeline

Congress authorized PPP through the CARES Act in March 2020 with $349 billion in initial funding, then replenished the program multiple times through December 2020 legislation. A Second Draw PPP for smaller businesses that already received a first loan launched in January 2021. The program stopped accepting new applications on May 31, 2021. As of 2021, the SBA no longer offers new PPP loans, though existing borrowers may still pursue forgiveness through their lender.

Frequently asked questions