Since the Paycheck Protection Program  (“PPP”) was announced, our team at NorthOne has been working around the clock to make sure that every small business has the opportunity to apply for a relief loan and get the help they need to make it through this difficult time. 

We’re proud to have been able to have helped business builders apply for tens of millions of dollars in loans for both new and existing customers, but our responsibility to small business owners doesn’t stop there. Now that relief money has started rolling out, we want to make sure you have all the information you need to get your loan forgiven. 

We’ve put together this easy to follow guide to PPP loan forgiveness. We’ll take you through everything you need to know to make the most of your relief funds and get your business back on track. 

What is the Paycheck Protection Program? 

The PPP came about as part of the federal government’s Coronavirus Aid, Relief, and Economic Security (CARES) Act. This program offers small businesses the chance to get a forgivable loan if they can prove their business has been negatively impacted by the COVID-19 crisis. 

So far $800-billion has been allocated to this program, a large chunk of which has already been loaned out to thousands of businesses across the country that applied for the PPP. The point of the PPP is to help small businesses cover payroll expenses as well as other basic costs that keep the lights on so businesses have the best chance of recovery when the crisis is finally over. 

What should my PPP loan be used for? 

If you want your PPP loan to be forgiven, 75% (or more) of the loan should be used to cover payroll. Small businesses employ 61.2 million people in the US – that’s nearly half of all working people. The purpose of the PPP was to help small businesses pay their employees, helping the country avoid mass unemployment in the fallout from coronavirus. Payroll includes benefits like sick leave, parental leave, and vacation pay. 

While the  main purpose of the PPP loan is to cover payroll it can also be used to cover other expenses including: 

  • Interest on mortgage obligations, incurred before February 15, 2020
  • Rent, under lease agreements in force before February 15, 2020
  • Utilities, for which service began before February 15, 2020

Make sure you are keeping a clear record of payments made with your PPP loan funds if you want the loan forgiven. 

What counts as payroll? 

When most people think of payroll they think of wages and salaries, but in the case of the PPP it’s actually a little broader than that. Payroll can include the following expenses:

  • Salary, wages, commissions, or tips (capped at $100,000 on an annualized basis for each employee)
  • Employee benefits including costs for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payments required for the provisions of group health care benefits including insurance premiums; and payment of any retirement benefit.
  • State and local taxes assessed on compensation.

PPP loans can also be claimed by sole proprietors and independent contractors for:

  • Wages, commissions, income, or net
  • Warnings from self-employment, capped at $100,000 on an annualized basis for each employee.

How much of the SBA PPP loan will be forgiven? 

Technically the PPP loan can be 100% forgivable. However, if you use the loan for anything other than payroll costs, mortgage interest, rent, and utility payments over the 8 weeks after getting the loan, you will have to make repayments. If you want to make sure the majority of your loan is forgiven, no more than 25% of the loan amount should be used for non-payroll related expenses. 

Remember that the key purpose of the PPP loan is to make sure as many people as possible are able to stay employed through the coronavirus crisis. When considering where to invest your PPP loan funds, just remember that you will have to pay the loan money back if you do not maintain your staff and payroll. 

Here are some of the key rules to follow if you want your PPP loan to be forgiven: 

Check last year’s records before making payroll decisions. 

A good rule of thumb is to remember that the PPP Loan is supposed to help your business maintain some resemblance to business as usual. If you make cuts to payroll, that are vastly different from last year, you will likely be forced to repay the loan. For example, if business is slow and there is not much for your employees to do, you might be tempted to encourage staff to take their vacation time. However, if this is not consistent with the previous year, you could be forced to repay your loan. Make careful decisions about spending and saving by making comparisons to last year’s payroll expenses. 

Maintain the number of staff 

This is really important. Your loan can only be fully forgiven if you maintain your full-time headcount. Laying off staff should be an absolute last resort. While you may feel like it is your only option to cut costs, consider that it could cost you more in the long term, as you will be forced to pay back your PPP loan. 

Maintain your level of payroll 

Your loan forgiveness will also be reduced if you cut salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019. Your payroll should look the same or similar to last year. 


If you have no choice but to make payroll cuts, but then receive a PPP loan, we strongly encourage you to consider rehiring. This could save you from having to pay back your loan. If the coronavirus forced you to make payroll cuts between the months of February 15, 2020 and April 26, 2020, you have until June 30th to rehire those team members and restore full-time employment and salary levels.  

You will have to repay some of your PPP loan if you don’t do this. If you offer to rehire staff and they refuse, you can include this in your headcount, just make sure you have the proper paper trail to prove it.

How do I ask for PPP loan forgiveness? 

To get loan forgiveness you’ll need to submit a request to the lender that serviced your loan. If you secured your loan through NorthOne, your lender will be one of our partners, either Cross River Bank or Radius Bank. 

When you submit your request you’ll need to include documents as proof of the number of full-time employees and pay rates, as well as the payments of the eligible mortgage, lease and utility obligations. 

You will need to certify that the documents are true and that you used the forgiveness amount to keep employees and make mortgage interest, rent, and utility payments. The lender must make a decision on forgiveness within 60 days.

Make sure you are keeping detailed records of your financial conditions, both before and after you receive the loan. You want to be able to prove that you needed that loan and that you spent the funds the way they were meant to be spent, essentially keeping operations running and keeping people employed. 

When will I need to start paying back my PPP loan? 

If you do have to pay back all or some of your PPP loan, you’ll have to do this within 2 years. Repayments are deferred for 6 months but interest will accrue over this period. The interest is a fixed rate of 1%. 

Can I still apply for a PPP Loan? 

Our partner Cross River Bank is still accepting applications for PPP loans. To apply you WILL NOT need to provide a personal guarantee or collateral. All you have to do is provide documentation that proves this loan is necessary to support your operations due to economic uncertainty caused by the Coronavirus crisis. You can find a full list of requirements on our NorthOne SBA PPP page, where you can also sign up for our application waitlist. 

We hope you found this article helpful and now have a better idea of what you need to do to make sure your SBA PPP loan is forgiven. We’re going to continue to work hard to provide you with the support and resources you need to get your business finances on track, so you can get back to work! 

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