Step-by-step instructions to calculate an SBA Paycheck Protection Program loan

The Paycheck Protection Program provides SBA small business First and Second Draw loans that function similarly to grants and incentivize owners to keep workers employed. These loans are eligible for complete forgiveness if 60% of the loan goes toward payroll costs, with the remainder spent on mortgage interest payments, rent and lease payments, certain property damage, essential supplier costs, worker protections, and utilities. Read more on how the program works.

The amount you might receive through PPP

First Draw applicants can qualify for up to $10 million or 2.5x average monthly payroll costs, whichever amount is lower. To calculate your First Draw loan amount as a small business, you’ll need to use the step-by-step business loan calculator provided by the SBA. 

Second Draw applicants can qualify for up to $2 million or 2.5x (3.5x for eligible Accommodation and Food services) average monthly payroll costs, whichever amount is lower. To calculate your Second Draw loan amount as a small business, you’ll need to use the step-by-step business loan calculator provided by the SBA.

How to calculate PPP payroll costs by business entity type

Eligible payroll costs for PPP include salary, wage, commission, or similar compensation. You can utilize your 941 form, 940 or 944 form, 1120-S form, 1040 – Schedule C form, or payroll documentation to determine your payroll costs.

Did You Know?

Documents used will depend on business entity type. See our support article for more information.

If you’re not sure which documents to gather, review the information below to determine the timeframe the documents will need to cover.

  • U.S. small businesses: The applicable period for an established small business is (1) calendar year 2019 or (2) calendar year 2020. If the entity is not self-employed, it may also use the prior 12 months
    • First Draw, new small business: Businesses formed after Jun 30, 2019, that apply for First Draw may use one of the above methods, or Jan 1, 2020, through Feb 29, 2020 (2 months)
    • Second Draw, new small business: Businesses not in operation for all of Feb 15, 2019, to Feb 15, 2020, should use all of the months in operation from 2019 through the end of 2020 to determine their average monthly payroll
  • Seasonal businesses: The applicable period for a seasonal business that only operates during certain parts of the year is any 12-week period (at the applicant’s discretion) between Feb 15, 2019, and Feb 15, 2020 
  • Not an employer: The applicable period is a full 2019 calendar year unless you are a seasonal business or new business. Sole-proprietors report income on Schedule C (line 31). If you’ve filed Schedule C and 944 forms, add line 31 from Schedule C to lines 1 and 2 from the 944 form

Once you’ve calculated your average monthly payroll cost, multiply it by 2.5 (3.5 for Second Draw food and accommodation services); this number is the maximum loan amount, up to $10 million for First Draws and $2 million for Second Draws. If you’re referring to your annual payroll costs, divide the annual number by 12 to determine the monthly average payroll cost.

Type of Business:Calculated payroll:Other payroll costs you can include:
1099 contractorThe sum of your income earned through freelance work, as reported on the 2019 1099-MISC forms you received (max $100,000).None.
Sole proprietorYour 2019 net profit (max $100,000) as reported on your Schedule C (line 31). U.S. annual employee salaries, including wages, commissions, tips, and state and local payroll taxes. Each employee is capped at $100,000 annually.
PartnershipYour 2019 self-employment earnings. If you have a 2019 tax return, this is reported on your Schedule K-1 (line 14), multiplied by 0.9235. You may include K-1 earnings as salary for each partner, up to $100,000.U.S. annual employee salaries, including wages, commissions, tips, and state and local payroll taxes. Each employee is capped at $100,000 annually.
S corpYour salary as reported through a payroll service (max $100,000). Your salary may only be considered if paid through payroll while remitting payroll tax.U.S. annual employee salaries, including wages, commissions, tips, and state and local payroll taxes. Each employee is capped at $100,000 annually.
C corpYour salary as reported through a payroll service (max $100,000). As a C corp, your salary may only be considered if paid through payroll while remitting payroll tax.U.S. annual employee salaries, including wages, commissions, tips, and state and local payroll taxes. Each employee is capped at $100,000 annually.

Considerations for PPP small business loans 

After you have a general sense of how much loan you’ll qualify for and how to calculate your payroll costs, be sure to:

  • Collect the required documents for your PPP loan application 
  • Remember you need to spend at least 60% of your loan funds on payroll expenses (and keep documentation of loan expenses to prepare for possible forgiveness)
  • Keep in mind that all PPP applicants, including self-employed, independent contractor, and sole proprietorship persons, are eligible to apply for SBA’s Paycheck Protection Program, as long as they were in operation on 2/15/2020 

We understand this is a difficult time for everyone, and we’re committed to helping business owners with government emergency relief resources and clear steps.

BlueVine is an official direct non-bank lender for the government-backed SBA Paycheck Protection Program. Our entire PPP application process, including retrieving your loan number, is automated and online. Get started with a fast and secure online PPP loan application.

Disclaimer

The information, opinions, and advice in this blog post are provided for educational purposes only and do not necessarily state or reflect those of BlueVine and/or its partners, including The Bancorp Bank, Celtic Bank, and Cross River Bank. Neither BlueVine nor its partners are responsible for the accuracy of any content provided by author(s) or contributor(s). For information about BlueVine products and services, please visit the BlueVine FAQ page.