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Paycheck Protection Program (Ppp) Loan Calculator

Estimate your PPP loan using payroll costs, owner compensation, and benefits. Supports First and Second Draw calculations including NAICS 72 multipliers.

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How the Paycheck Protection Program Loan Calculator Works

The Paycheck Protection Program (PPP) loan amount formula follows a calculation established by the U.S. Department of the Treasury and the Small Business Administration (SBA): the maximum loan equals 2.5 times average monthly payroll costs, subject to a program cap. This paycheck protection program calculator automates that multi-step process so businesses can estimate their maximum eligible relief in seconds.

The Core Formula

The PPP loan amount L is expressed as:

L = min(P / 12 x 2.5, C)

Where P represents total eligible annual payroll costs, dividing by 12 converts annual figures to a monthly average, 2.5 is the standard multiplier (3.5 for qualifying Second Draw borrowers in NAICS 72), and C is the applicable program loan cap ($10 million for First Draw, $2 million for Second Draw).

Step-by-Step Calculation

  1. Calculate total eligible employee payroll: Sum all gross wages, salaries, tips, commissions, and bonuses paid to employees, applying the $100,000 annualized compensation cap per employee. If one employee earns $150,000 annually, only $100,000 of that compensation counts toward the total.
  2. Add owner and self-employment income: Include net profit from Schedule C (sole proprietors), Schedule K-1 self-employment earnings (partners), or owner compensation replacement for S-corp shareholders, each capped at $100,000 annually.
  3. Add employer benefit contributions: Include employer-paid group health insurance premiums covering medical, dental, vision, life, and disability plans, plus employer contributions to employee retirement plans such as 401(k) matching or defined-benefit pension funding.
  4. Add state and local payroll taxes: Include employer-paid state unemployment insurance (SUI) and comparable local taxes assessed on employee compensation. Federal payroll taxes including FICA and FUTA are excluded from this sum.
  5. Compute average monthly payroll: Divide the total annual payroll costs by 12. A business with $480,000 in eligible annual payroll costs arrives at $40,000 in average monthly payroll.
  6. Apply the multiplier: Multiply average monthly payroll by 2.5 for standard borrowers. Using the example: $40,000 x 2.5 = $100,000 maximum loan. Accommodation and Food Services businesses (NAICS code 72) applying for a Second Draw loan use a 3.5x multiplier, so $40,000 x 3.5 = $140,000.
  7. Apply the loan cap: First Draw loans are capped at $10 million. Second Draw loans are capped at $2 million. The final loan amount is the lesser of the calculated figure and the applicable cap.

Variable Definitions

  • Annual Payroll (employees): Total gross wages, salaries, tips, commissions, and similar compensation paid during the look-back period. Each employee's cash compensation is capped at $100,000 on an annualized basis.
  • Owner Compensation: Net Schedule C profit for sole proprietors; Schedule K-1 self-employment earnings for partners; W-2 officer wages for S-corp owners. Capped at $100,000 per individual owner.
  • Employer Health Insurance: Employer-paid premiums for group health, dental, vision, life, and disability coverage. Employee payroll-deducted contributions are excluded from this figure.
  • Employer Retirement Contributions: Employer matching and non-elective contributions to 401(k), SEP-IRA, SIMPLE IRA, or pension plans. Employee salary deferrals are not included.
  • State and Local Payroll Taxes: Employer share of state unemployment insurance and comparable local levies. Federal taxes such as Social Security, Medicare, and FUTA are excluded.

First Draw vs. Second Draw Loans

First Draw PPP loans targeted businesses with no prior PPP participation, offering up to $10 million based on the 2.5x multiplier. Second Draw loans required prior PPP receipt and documented revenue reduction of 25% or more in any 2020 quarter relative to the same 2019 quarter. The Second Draw maximum is $2 million, with the 3.5x multiplier reserved for NAICS 72 businesses to reflect the severe disruption faced by hospitality and food service operators.

Worked Example

A restaurant (NAICS 72) applying for a Second Draw loan reports: $600,000 in annual employee payroll after caps, $80,000 in owner compensation, $24,000 in employer health premiums, $18,000 in retirement contributions, and $12,000 in state payroll taxes. Total eligible payroll costs equal $734,000. Average monthly payroll = $734,000 / 12 = $61,167. Second Draw loan = $61,167 x 3.5 = $214,083 — well within the $2 million cap.

According to the Government Accountability Office (GAO-21-601), the PPP distributed over $780 billion in loans to approximately 11.5 million borrowers across two rounds, making precise loan calculation essential for maximizing relief under program rules.

Reference

Frequently asked questions

How is a PPP loan amount calculated?
A PPP loan equals 2.5 times average monthly payroll costs, capped at $10 million for First Draw loans and $2 million for Second Draw loans. Average monthly payroll is total eligible annual payroll costs divided by 12. Eligible costs include employee wages capped at $100,000 per employee, owner compensation, employer health insurance premiums, employer retirement contributions, and state and local payroll taxes paid by the employer.
What payroll costs are included in the PPP loan calculation?
Eligible PPP payroll costs include gross wages and salaries capped at $100,000 per employee annually, tips, commissions, bonuses, owner or self-employment income capped at $100,000, employer-paid group health and dental insurance premiums, employer retirement plan contributions such as 401(k) matching, and state and local employer payroll taxes such as state unemployment insurance. Federal payroll taxes like FICA and FUTA and employee-paid benefit contributions are excluded.
What does the $100,000 per-employee compensation cap mean for PPP?
The $100,000 per-employee cap limits how much of any one employee's cash compensation counts toward the payroll cost calculation. For example, if an employee earns $150,000 annually, only $100,000 of that wage is eligible. The cap applies to cash wages and salary but does not restrict the inclusion of employer-paid health insurance premiums or retirement plan contributions for that same employee, which count separately in full.
What is the difference between First Draw and Second Draw PPP loans?
First Draw PPP loans were available to businesses that had not previously received a PPP loan, with a maximum of $10 million using the 2.5x monthly payroll multiplier. Second Draw loans required prior PPP receipt and a documented revenue reduction of at least 25% in any 2020 quarter compared to the same 2019 quarter. Second Draw loans carry a $2 million cap, and NAICS 72 businesses qualify for the 3.5x multiplier instead of 2.5x.
Do restaurants and hotels qualify for a higher PPP multiplier?
Yes. Businesses classified under NAICS code 72 — Accommodation and Food Services, including restaurants, hotels, caterers, and food service contractors — qualify for a 3.5x monthly payroll multiplier on Second Draw PPP loans instead of the standard 2.5x. This higher multiplier was established to reflect the disproportionate revenue losses faced by hospitality businesses. The Second Draw program cap of $2 million still applies regardless of the multiplier used.
What is the maximum PPP loan amount a business can receive?
The maximum First Draw PPP loan is $10 million, calculated as 2.5 times average monthly payroll costs. The maximum Second Draw PPP loan is $2 million, based on 2.5 times average monthly payroll or 3.5 times for NAICS 72 businesses. Both caps apply per borrower. Under SBA affiliation rules, businesses under common control may have their individual loan amounts aggregated when the SBA evaluates compliance with program size and cap requirements.