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Everything You Need to Know about PPP Loan Forgiveness in 2021

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After all the chaos and unpredictability of 2020, businesses were waiting to hear some good news. Therefore, it will be a relief for many businesses to hear that the United States Government has decided to bring back the Paycheck Protection Program and with significantly better features to boot. Eligible businesses, as well as nonprofits, can now apply for the loan with increased coverage periods, higher loan amounts, longer repayment terms and more. 

What is a PPP Loan?

Paycheck Protection Program loans or PPP loans for short are designed to provide incentives to eligible businesses to ensure that their employees remain on the payroll. Employers can avail of the loan to cover their payroll costs and other eligible expenses such as operational costs. The primary motive behind these loans is to help businesses that have suffered due to the COVID-19 pandemic.

The best aspect of these loans is that they are entirely forgivable as long as certain criteria are met. Here are a few details about PPP loans to be aware of.

  • The interest rate for PPP loans is fixed at 1%.
  • Organizations do not need to provide any personal guarantees or collateral when applying.
  • There are no fees for eligible businesses charged by either the lenders or the government.
  • Borrowers can apply for loan forgiveness to defer the loan payments till the amount is remitted by the Small Business Administration. In case the borrower does not apply for loan forgiveness, the payments will be suspended for 10 months till after the coverage period ends for loan forgiveness.
  • The maturity for loans availed after June 5, 2020, is 5 years.

As mentioned earlier, it is possible to avail of complete loan forgiveness for PPP loans. However, the fine print will determine if the entire or a part of the amount is forgiven and there sure is a lot of fine print to cover.

Check the major rules governing PPP loan forgiveness below


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Mandatory 60% Payroll Usage

The first and foremost point to remember is that you are applying for what is essentially a payroll loan. Therefore, 60% of the loan must be spent only on payroll costs at the very least. You can use the remaining 40% for any eligible expenses that you may have. If you are unable to use at least 60% for payroll, the forgivable amount will be scaled back proportionally.

Tracking payrolls and expenses can be confusing and challenging if you are using manual or other less than ideal solutions for tracking payroll costs and expenses. Having a robust point solution like Replicon that can automate payroll costing and expense calculation can eliminate errors and speed up the process. Thereby, it will remove a major concern when it comes to fulfilling this 60-40 criterion.

Payroll Costs Eligible for Forgiveness

Since 60% of the loan must be used for payroll costs, it is essential to know exactly where they can be spent apart from the wages and salaries of your employees. Other eligible costs under this criterion include commissions, tips and bonuses, paid leaves, retirement benefits and group insurance benefits.

If you are using spreadsheets, you may face issues like accidental edits and manual entry errors, resulting in inconsistencies and inaccuracies. Replicon’s Time Tracking solution can help you precisely track all payroll costs by eliminating errors. Real-time notifications and configurable validations ensure that employees fill in their times correctly at the right time. That, in turn, drives accuracy in wage and salary calculations.

Other Expenses Eligible for Forgiveness

The rules cover quite a few expense categories. Here is a brief overview:

  • Rent: This includes any fees paid for any vehicle, equipment or building whose lease date falls before February 15, 2020.
  • Mortgage Interests: Interest payments on any mortgage debts made prior to February 15, 2020, are eligible.
  • Utilities: This includes fees paid for electricity, internet service, water, gas, telephones and transportation under agreements that were signed prior to February 15, 2020.
  • Worker Protection: This covers the costs of purchasing protective equipment for employees as well as investments made for complying with health and safety guidelines.
  • Supplier Costs: This includes payments under agreements made with suppliers as long as those payments are necessary for continuing operations. Those agreements must be made prior to getting a PPP Loan.
  • Operation Expenses: Any expense incurred for accounting, cloud computing, software, remote-enabling services and human resources are covered here.
  • Property Damage Costs: This covers the costs for any damages that occurred due to public disturbances in 2020 which weren’t covered by your insurance.
Coverage Period

You must spend the entire amount granted to you through the PPP loan within the 24 weeks of the coverage period. Failing this, those expenses will not be forgiven. The coverage period will start on the day you get the first payment from the lender. This might not be the day when the loan agreement is signed.

Employee Staffing Criteria

To be eligible for complete forgiveness, the number of employees must be maintained. There are a couple of points to note here.

Firstly, the total employee count must be maintained. Businesses that had to lay off employees due to financial problems must restore that number by rehiring former employees or hiring new members. Do note that this rule does not apply in cases of voluntary resignations or terminations for cause.

Secondly, it is possible that your former employees will refuse to rejoin for various reasons. This is not an issue as long as you document that you offered the same salary for rehiring them along with the employee’s rejection of the same.

Employee Salary Criteria

Businesses must maintain a minimum of 75% of their salary. If employee pay or their hours were reduced due to COVID-19, the PPP loan must be used for improving the wages. Failure to comply with this rule over the 24-week term will cause the forgiveness to decrease proportionately.

Do note that the salary criteria are assessed per individual employee and not the entire payroll of the organization. Therefore, the wages of each employee must be 75% of the total amount they had before at least.

Considering the difficulty in manually tracking these details, you will find Replicon’s platform to be hugely beneficial. Replicon’s platform can capture all payroll data at a granular level, allowing you to get accurate data on salaries and wages. This will make it easier to meet the salary criteria for PPP loans.


You must submit the loan forgiveness application within 10 months of the completion of the 24-week period. This application can be submitted to the lender.

If you are unable to do so, the payment deferment of the PPP loan will end. You will now have to make the loan payments at a fixed interest rate of 1% with a loan term of 5 years. This also applies if you are ineligible for loan forgiveness.

For further details on your PPP loan, contact your lender. The lender will also provide you with all the information you need to submit the forgiveness application


The documentation necessary to avail of the loan forgiveness will depend on the loan amount. The details are as follows.

For loans under $150,000, you need to submit a single-page certification. This document declares the total loan amount and the amount spent on your payroll costs. It will also state the number of employees that the loan enabled you to retain

For loans over $150,000, the documentation is more extensive. This is necessary for verifying all eligible expenses. Here is a shortlist of documents you may need to submit with the application.

  • The payroll reports
  • The payroll tax filings
  • Documents that report payroll, income, losses and unemployment insurance.
  • Invoices for health insurance
  • Receipts for employer-paid retirement plans
  • Documentation that shows that the business was active prior to February 15, 2020
  • Documentation for the start date of all eligible expenses such as rent and utility.

You must maintain absolutely meticulous records and documents on everything related to your PPP loan. This will help you avoid any potential issues that may crop up during audits. Here again, Replicon’s Time Tracking platform can be enormously helpful as a single source of truth for time. You can use it to maintain extensive and verified documentation to avoid potential audit-related issues.

Reapplication for Existing Borrowers

If you have previously applied for a PPP loan and did not receive your loan forgiveness within December 27, 2020, you can reapply for a First Draw PPP loan. However, you must have returned the funds, under the previous First Draw PPP loan, in part or in full.

Do keep in mind that PPP loans, while 100% forgivable, do come with terms and conditions. Failure to meet those terms can force your business to make loan payments that you may not have accounted for. To make it easier for you to comply with these rules, you can leverage Replicon’s platform. Learn more on how our platform simplifies payroll cost management, expense tracking, compliance, and more in the following blog:


Gain Centralized Visibility and Control Over Your Gross Time and Pay Data

Download Datasheet Now

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Arpan Patra


Arpan Patra


Arpan Patra has been writing about technology for over a decade. Now, as a Senior Marketing Communications Specialist at Deltek | Replicon, he focuses on how technologies like AI/ML-powered professional services automation solutions can empower organizations to optimize and grow their business. When he’s not busy typing noisily, he enjoys sitting down with a book and a warm cup of coffee.


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