PPP Forgiveness Maximization Q&A | Gershon Morgulis

Today, June 30th, the federal government will stop accepting applications for the stimulus plan for small businesses (commonly known as the PPP). As over $500B in loans have been disbursed among businesses across the country, those who have received the payout must now turn their attention from achieving loan approval to achieving maximum loan forgiveness.

To support business owners through this loan forgiveness process, finance expert Gershon Morgulis has offered some best practices and provided the answers to a few questions that will aid owners in achieving maximum PPP loan forgiveness based on the most up-to-date SBA guidelines and statutes:

1) My PPP was for the wrong amount. I’ll be fine as long as I spend it on payroll. Right?

A. Wrong! In the course of its review, the SBA can determine ineligibility based on a number of factors including:

  1. if the borrower was ineligible for the PPP loan based on the CARES Act
  2. the SBA rules/guidance available at the time of the borrower’s loan application
  3. the terms of the borrower’s PPP loan application (for example, because the borrower lacked an adequate basis for the certifications that it made in its PPP loan application)

If your loan is deemed ineligible under any of these circumstances, you will not be forgiven for the money you should not have received.

2) I received a PPP loan and expect to hire back all my furloughed employees so that I’m fully staffed by June 30. Can I lay people off again on July 1?

A. No. The new PPP forgiveness form now looks to your FTEs at the time you file your forgiveness application (unless you file after December 31, 2020, in which case they look at FTEs on 12/31).

3) I got my $1 million PPP loan and decided that I will lay people off and not get forgiveness. Can I use the money for rent instead?

A. Partially. The PPP Flexibility Act says that 60% of the forgiven amount of PPP loan needs to be used on payroll. In the recently released guidance, the SBA clarifies that not only are you limited on forgiveness, but you are also limited on the amount of PPP funds that may be spent on non-payroll items. If you laid everyone off, you are still limited in how much PPP money can be spent on rent ($400k in this case).

4) I received my PPP loan and expect to have it forgiven. May I still defer the employer portion of payroll taxes?

A. Yes. The PPP Flexibility Act of 2020 expanded the payroll tax deferral to include businesses that had a PPP loan forgiven. Your taxes will be due eventually, but you may defer 2020 payroll taxes and pay them at the end of 2021 and 2022.

5) I got a $2 million PPP loan a few weeks ago, and I won’t qualify for full forgiveness. I know I need to pay back within 2 years, but I heard the president just signed a bill stretching it to 5 years. So, can I pay my loan back in 5 years?

A. No. The SBA has clarified that only new loans issued after the bill was signed will qualify for the 5-year repayment period. Nevertheless, you may be able to negotiate a term increase at the lender’s discretion.

6) I used up all my PPP funds in 12 weeks. Can I apply for forgiveness, or do I need to wait until the end of the “covered period”?

A. Go ahead! A borrower may submit a loan forgiveness application before the end of the covered period if the borrower has used all of the loan proceeds for which the borrower is requesting forgiveness. If the borrower applies for forgiveness before the end of the covered period and has reduced any employee’s salaries or wages in excess of 25%, the borrower will have his loan forgiveness reduced to reflect a salary reduction for the full 8-week or 24-week covered period.

7) I was unable to rehire the employees I laid off. Will I receive an FTE reduction penalty?

A. That depends. A business will not be subject to an FTE reduction penalty if it is able to document (i) an inability to rehire individuals who were employees of the eligible recipient on February 15, 2020; and (ii) an inability to hire similarly qualified employees for unfilled positions on or before December 31, 2020.

8) Are there caps on the amount of PPP loan forgiveness available for owner-employees and self-employed individuals’ own payroll compensation?

A. Yes. While an employee can receive a substantially higher salary in 2020 than they received in 2019, an owner-employee is capped by 8 weeks of 2019 payroll (when using an 8-week covered period) and 2.5 months of 2019 payroll (when using a 24-week covered period). Depending on the structure of your business (self-employed, S-corp, C-corp, etc) your total amount may include or exclude benefits.

If you have additional questions regarding the program, or any general questions about managing your business’ finances through this uncertain time, you can reach out to the Imperial Advisory team at

Gershon is the founder and principal of Imperial Advisory, an outsourced-CFO firm, as well as an Adjunct Professor of Finance at Touro College.


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There are 1 Comments to "PPP Forgiveness Maximization Q&A | Gershon Morgulis"

  • ich hub ah kasha says:

    I got the approved for the loan and it was deposited into my account. How do I now apply for forgiveness?