CARES Act: Know Your Denominator!

Here is a quick tip for small businesses who will be applying for the Paycheck Protection Program (PPP) of the recently approved CARES Act to help meet payroll and cover other expenses from February 15th to June 30th.  Loans may be forgiven if the business uses the funds for payroll, interest payments on mortgages, or rent and utilities.  Here is a quick tip for determining the forgiveness section of the PPP portion of the CARES Act:

Covered expenses in the applicable 8-week period


Your employee ratio (the ratio must be less than or equal to 1) and can be calculated by: (FTE* in the covered period / FTE in a base period). This is your denominator.


Loan Forgiveness

*FTE: Full-time equivalent

While we are all awaiting final interpretations and applications, there is one thing we can all do:


Average FTE in covered 8-week period / Average FTE per month 2/15/2019 to 6/30/2019

OR (denominator selected by borrower)

Average FTE in covered period / Average FTE per month 1/1/2020 to 2/29/2020

You should calculate and know these figures now and it’s important that you choose the lower of the two. Remember FTE means Full-Time Equivalent, so measure carefully!

Maximum loan forgiveness is the loan amount and the reduction factor cannot increase the forgiveness (in the case the FTE in the covered period is higher than the base period, the factor is 1.00).

Average FTE is determined by calculating average number of FTE for each pay period falling within a month.

The PBO Advisory Group team is available to assist you with the PPP loan or any aspect of the CARES Act. Please contact us today at 858-622-1681.