The calculation of average monthly payroll cost is the basis of Paycheck Protection Program loans for small businesses since it concludes the loan amount you can apply for. At Merchant Advisors, we have reviewed thousands of PPP applications and discussed the final rule published by the SBA with our lending partners. Based upon the discussion and PPP loan application analysis, we’ve compiled a handy guide on how to precisely calculate the average monthly payroll cost of your business and guarantee the successful submission of your PPP loan application to get quick funding.

What to Include in Payroll Costs Calculation?

Here are some of the payroll costs you should include when calculating it for the PPP loan:

  • Gross wages and salary paid to employees including overtime, bonuses, and reimbursements capped at $100,000 per employee.
  • Cash tips or equivalent
  • Vacation, parental, family, medical, or sick leave
  • Allowance for dismissal or separation
  • Payments made for group healthcare benefits including insurance premiums
  • Payment of any retirement benefits
  • State or local tax assessed on the compensation of employees

What to Exclude in Payroll Costs Calculation?

Here are some of the costs you should not factor into your payroll cost calculation:

  • The excess of annual employee and/or owner compensation over $100,000 ($8,333/month)
  • Compensation for employees outside the U.S.
  • Taxes imposed or withheld under Chapters 21, 22, and 24 of the IRS Code
  • Estimable sick and family leave under the Families First Coronavirus Response Act

Necessary Paperwork for the PPP Loan

While calculating your payroll cost for the PPP loan application, its best to supplement your loan application with the necessary paperwork. Lenders are likely to serve and prioritize loan applications that are made with the necessary paperwork and are comprehensive and organized. The necessary documents include your payroll registers, tax, and financial statements.

It’s recommended to obtain the necessary paperwork that is typically required by the lenders to process your application and to audit your calculation in order to improve the turnaround time. According to SBA, the payroll records are adequate credentials to establish the average monthly payroll of your business. Here are some of the FAQs for the Payment Protection Program you should read published by the Small Business Administration (SBA) and the Dept. of the Treasury.

Apply for a PPP Loan Now

Payroll and Tax Documentation

The payroll documentation includes the annual payroll register by an employee for the last 12 months detailing payments for gross wages, tips, vacation, benefits, and taxes. If you’re using a payroll processing software, most of them have created special PPP reports for this program. Also, its recommended to have a payroll statement for February since the SBA requires proof of payroll as of 2/15/2020.

Instead of using payroll documents, you can also use IRS forms 941944940 and forms 10401099-MISC for self-employed. Some banks are also requesting these forms for the PPP loan application.

Calculate Loan Amount and Gross Monthly Payroll

After you obtain all the necessary documentation, use them to calculate average monthly payroll for the last 12 months and that concludes the loan amount you can qualify for.  Calculating gross monthly payroll and loan amount is easier for businesses that are already working with PEOs with a PPP-specific report.

Submit Your PPP Loan Application

You can apply through Merchant Advisors using our online application for a quick loan decision. If you have developed a solid relationship with some banks that are accepting PPP loan applications, we recommend you to apply through them.

Banks Accepting PPP Loan Applications

  1. Bank of America
  2. Chase Bank
  3. Wells Fargo

Regional and Local Banks Accepting PPP Loan Applications

  1. Ameris Bank
  2. Atlantic Capital Bank
  3. Celtic Bank
  4. Citizens Bank
  5. FirstBank
  6. First Commonwealth Bank
  7. First Home Bank
  8. First United Bank
  9. Fulton Bank
  10. Hanmi Bank
  11. Huntington Bank
  12. Independent Bank
  13. Liberty Bank
  14. Live Oak Bank
  15. Midwest BankCentre
  16. Old National
  17. Peapack-Gladstone Bank
  18. Pinnacle Bank
  19. PNC Bank
  20. Sunflower Bank
  21. Umpqua Bank
  22. Univest Bank and Trust Co.
  23. S. Bank
  24. West Town Bank & Trust

Credit Unions and Non-Bank Lenders Accepting PPP Loan Applications

  1. America First Credit Union
  2. Fountainhead SBF LLC
  3. Ready Capital
Small Business Financing News │ Merchant Advisors | blog
How to Calculate Avg. Monthly Payroll Cost for Paycheck Protection Program Loans
How to Calculate Avg. Monthly Payroll Cost for Paycheck Protection Program Loans
Looking for funding to fund your small business? The road ahead is full of twists and turns because it does require a lot of time and research to locate the best funding program that suits your business. Due to theRead more
Here is everything you need to know when calculating your average monthly payroll cost for the Paycheck Protection Program Loan application.
Merchant Advisors
Merchant Advisors