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Calculate monthly payroll costs for SBA Paycheck Protection Program loans

Use our guide to calculate how much you can borrow through the PPP.

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The SBA reopened the Paycheck Protection Program (PPP) applications to all eligible lenders on January 19, 2021. But it's only accepting applications from businesses with fewer than 20 employees between February 24 and March, 10 2021. Applications will be avail to all eligible businesses until March 31, 2021.

Calculating payroll costs is the most complicated part of the SBA’s two-page Paycheck Protection Program (PPP) loan application. You’ll need to make sure you’re including all eligible expenses to get the full funding you’re entitled to borrow.

How to calculate your maximum PPP loan amount

The SBA uses the following formula to calculate the maximum amount you can borrow through the Paycheck Protection Program:

  • One month of eligible payroll costs x 2.5 = Maximum Paycheck Protection Program loan amount

However, it's not exactly that straight forward. How much you receive depends on your employee's salaries and whether you got an Economic Injury Disaster Loan (EIDL) and grant.

Follow these steps to get an accurate count of your payroll costs.

Step 1: Add up your payroll costs.

Add up all eligible payroll costs before federal taxes in 2019 or 2020. Only include costs from employees who primarily live in the US, excluding independent contractors that your business has hired — they can apply for a PPP loan on their own.

New and seasonal businesses also have the option of using these payroll costs instead:

  • Businesses that opened in 2020. Add up monthly payroll costs between January 1, 2020 and February 29, 2020.
  • Seasonal businesses. Add up the payroll costs for a 12-week period between February 15, 2019 and February 15, 2020. The start date is up to you, the business owner.

Step 2: Subtract excess from salaries over $100,000.

The Paycheck Protection Program doesn’t cover anything over $100,000 for an individual employee’s annual salary before federal income taxes. If none of your employees make over $100,000 a year, skip ahead. Otherwise, you can follow these steps:

  1. Subtract $100,000 from the salary of each employee who makes over $100,000 annually.
  2. Add up the results.
  3. Subtract that amount from the annual payroll cost you calculated in Step 1.
How to subtract excess salaries for new and seasonal businesses

If you have a new or seasonal business, follow these steps:

  1. Subtract $100,000 from each salary over $100,000.
  2. Add up the results.
  3. Divide the result by 12.
  4. Multiple it by the number of months your payroll costs cover in Step 1.
  5. Subtract that amount from the payroll costs.

Step 3: Calculate an average monthly payroll cost.

Divide the results you calculated in Step 2 by 12.

Step 4: Calculate your maximum loan amount.

Multiply the average monthly payroll cost you calculated in Step 3 by 2.5.

If your business didn’t receive an EIDL that you used to cover payroll costs between January 31, 2020 and April 3, 2020, you’re finished. Otherwise, there’s one more step.

Step 5: Add your EIDL balance.

You’re required to refinance any EIDL your business received to cover payroll costs during the coronavirus outbreak.

  1. Add the EIDL balance to your maximum loan amount based on payroll, which you calculated in Step 2.
  2. Subtract any advance you received on your EIDL — you don’t have to repay this amount.

The resulting number is the maximum amount you can borrow through the Paycheck Protection Program.

How to calculate your maximum Second Draw PPP loan amount

The SBA uses the same formula to calculate the maximum you can borrow for a second PPP loan with one exception. Businesses in the accommodation and food services industry can borrow 3.5x the average monthly payroll costs. All Second Draw PPP loans are capped at $2 million.

How to calculate your average monthly payroll cost for a Second Draw loan

You have three choices when it comes to which period to consider for your average monthly payroll cost.

  • The 12-month period before the loan is issued
  • Calendar year 2020
  • Calendar year 2019

The SBA recommends using a calendar year to calculate payroll costs to make things easier in an Interim Final Rule issued on January 8, 2021. Since all Second Draw loans will be made in the first quarter of 2021, the SBA doesn't expect it to make much of a difference if you rely on 2020 payroll costs or the 12 months before.

How to calculate your PPP loan amount as a self-employed borrower

Self-employed individuals need to follow three steps to determine the maximum amount they can borrow:

  1. Locate your annual net profit on your 2019 Form 1040 Schedule C, line 31.
  2. Divide your annual net profit by 12 to calculate your average monthly net profit.
  3. Multiply your average monthly net profit by 2.5.

If you have an Economic Injury Disaster Loan (EIDL) that wasn’t issued during the COVID-19 pandemic, you can add it to your final amount in Step 3 to refinance it through the PPP.

Borrowers are responsible for calculating the loan amount

According to the SBA, it’s up to you, the borrower, to calculate your maximum loan amount when you apply for the PPP. In fact, it’s one of the first steps of the application. And you’ll have to back up that number with documentation. That’s why it’s essential to understand which costs count and which don’t count.

How to prove your payroll calculations

The SBA allows you to use the following documents to confirm your payroll expenses — though some lenders might have more specific requirements.

  • Payroll processor records
  • Payroll tax filings
  • Form 1099-MISC for sole proprietorships
  • Form 1040 Schedule C for self-employed individuals
  • Income and expense reports for sole proprietorships
  • Bank statements

Lenders might accept other types of documentation of payroll costs, depending on the circumstances. And if you haven’t filed your 2019 taxes as a self-employed applicant, the SBA will issue additional documentation guidelines. Check with your lender to ensure you have all the correct documents when you apply.

What if I use a payroll provider?

If your business relies on a professional employer organization (PEO) or other payroll provider to process payroll expenses, you might have to submit different documents. If you live in a state where you’re required to report payroll provider data in your state taxes, submit the following documents — if possible:

  • Schedule R, Form 941
  • Allocation schedule for aggregate Form 941 filers
  • Payroll provider Form 941
  • Quarterly federal tax return

Otherwise, ask for a statement from your provider stating the wages and payroll taxes your company paid.

What’s an eligible payroll cost?

The following costs count when you calculate your PPP loan amount. When calculating your loan amount, use the cost before federal taxes.

  • Salary, wages, commissions or compensation — up to $100,000 annually
  • Cash tips paid to employees or the equivalent
  • Vacation, medical, family or sick leave costs
  • Costs associated with losing an employee, like severance
  • Group health care benefits, including premiums
  • Retirement benefits
  • State and local taxes on employee compensation

Ineligible payroll costs

These costs do not count toward payroll calculations for a PPP loan:

  • Employee compensation equivalent to an annual salary over $100,000
  • Federal payroll, income or railroad retirement taxes
  • Compensation for employees with a primary residence outside the US
  • Sick or family leave that qualifies for a tax credit under the Families First Coronavirus Response Act
  • Payments made to independent contractors your company hired
  • Owner distributions
  • Shareholder draws

Apply for a Paycheck Protection Program loan today

Below is a list of online lenders offering SBA Paycheck Protection Program loans. We recommend applying as soon as possible, since funds are available on a first-come, first-served basis. Get help filling out the application with our guide.

Data updated regularly
Name Product Filter Values Loan amount APR Requirements

Fora Financial business loans

Fora Financial business loans
$5,000 – $500,000
6+ months in business, $12,000+ monthly revenue, no open bankruptcies
Get qualified for funding in minutes for up to $500,000 without affecting your credit score. Great for SBA loan applicants.

ROK Financial business loans

ROK Financial business loans
$10,000 – $5,000,000
Starting at 6%
Eligibility criteria 3+ months in business, $15,000+ in monthly gross sales or $180,000+ in annual sales
A connection service for all types of businesses — even startups.

OnDeck small business loans
Finder Rating: 4.7 / 5: ★★★★★

OnDeck small business loans
$5,000 – $250,000
As low as 11.89%
600+ personal credit score, 1 year in business, $100,000+ annual revenue
A leading online business lender offering flexible financing at competitive fixed rates.

Lendio business loans
Finder Rating: 4.75 / 5: ★★★★★

Lendio business loans
$500 – $5,000,000
Starting at 6%
Operate business in US or Canada, have a business bank account, 560+ personal credit score
Submit one simple application to potentially get offers from a network of over 300 legit business lenders.

Rapid Finance small business loans
Finder Rating: 3.74 / 5: ★★★★★

Rapid Finance small business loans
$5,000 – $1,000,000
Fee based
Steady flow of credit card sales, bad credit OK

First Down Funding business loans

First Down Funding business loans
$5,000 – $300,000
Fee Based
At least 2 years in business, an annual revenue of $300,000+, and a minimum credit score of 400
Alternative financing up to $300K with highly competitive rates.

Fundbox business loans
Finder Rating: 4.76 / 5: ★★★★★

Fundbox business loans
$1,000 – $150,000
You must have an established business.
Get flat rate, short-term financing based on the financial health of your business, not your credit score.

Kickpay e-commerce business loans
Finder Rating: 3.7 / 5: ★★★★★

Kickpay e-commerce business loans
$20,000 – $1,000,000
Not applicable
At least $250,000 in the past 12 months of revenue, e-commerce business, use a 3rd party fulfillment center for storing and shipping inventory, at least one US location.
Get a loan for your e-commerce business based on your sales history.

LendingClub business loans
Finder Rating: 4.5 / 5: ★★★★★

LendingClub business loans
$5,000 – $500,000
12.15% to 29.97%
12+ months in business, $50,000+ in annual sales, no bankruptcies or tax liens, at least 20% ownership of the business, fair personal credit score or better
With loan terms that vary from 12 to 60 months, enjoy fixed monthly payments and no prepayment penalties through this award-winning lender.

Monevo business loans

Monevo business loans
$500 – $100,000
3.99% to 35.99%
Credit score of 500+, legal US resident and ages 18+.
Use this connection service to get paired with a loan you can use for business.

Compare up to 4 providers

Bottom line

You’re responsible for calculating the correct loan amount when you apply for a Paycheck Protection Program loan — and to back it up with documents. If you have a payroll cost that you aren’t sure is eligible, reach out to an expert — such as a CPA, your lender or your local Small Business Development Center.

Read our guide to funding your business during the coronavirus outbreak to learn about your other options.

Frequently asked questions

Answers to common questions about calculating your PPP loan amount.

What documents do self-employed workers need to submit to get a PPP loan?

The SBA requires independent contractors and sole proprietorships to submit IRS Form 1099-MISC in addition to income and expense reports.

Can I qualify if my company only works with independent contractors?

You can. However, independent contractor payroll costs don’t count toward your payroll costs, so only your compensation will be covered.

Can I use a PPP loan to cover the cost of a household employee, like a nanny?

No, the PPP doesn’t cover costs of household employees. You must be a registered business to qualify. received a PPP loan in May 2020.

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