Navigating the Paycheck Protection Program Loan Forgiveness
It's hard to believe that it's been almost 2 months since the passing of the CARES Act and nearly 6 weeks since the Paycheck Protection Program (“PPP”) loan applications opened for the first round, now into the second round of applications. Some business owners are well into the 8-week timeframe in which the loan may be forgivable, with others being on the front end of that, and some may have not even received their loan proceeds yet. With all the guidance being released daily on loan forgiveness, it may be helpful to have some tips and resources to help you navigate the PPP.
1 | Use the loan for its intended purpose
The first one may seem like common sense, but it is very important, and that's using this loan for its intended purpose. As you’ve probably heard several time, the loan may be forgiven if you use at least 75% of the proceeds to cover Payroll costs (salary, healthcare, retirement benefits, payroll taxes, etc.). The remainder can potentially be spent on other, Non-Payroll costs such as rent, utilities, and mortgage interest. These are the costs that the money was intended to be used for, so following these guidelines will improve your chances of the loan being forgiven.
2 | Keep diligent records
Another point that may seem like common sense, but could also get missed in all the chaos, is keeping diligent records. What documentation you're going to have to submit at the end of the 8 weeks, for the purposes of loan forgiveness, is ultimately up to your loan provider. Hopefully they gave you some information on what to expect; however, many people have been receiving mixed information (or no information at all) on what they will be required to provide in order to have their loan forgiven. In the absence of clearly-defined guidelines, play it safe and track your records very diligently during this time.
It may be worth setting up a separate bank account (with the bank where you received the PPP loan) to hold your PPP funds. This will make tracking PPP cash flows much easier. Another good way to keep track of everything is to set up a separate folder to track everything you use the PPP loan for. Store all evidence and documentation of all PPP-related payments and expenses in that folder, including, but not limited to:
Payroll tax filings
Healthcare costs
Retirement contributions
Invoices & receipts for utilities, rent payments, etc.
FTE calculations
Keep all of this stored in one place so it's easily accessible, including payroll-related calculations; even if it's an Excel spreadsheet, put it all in that folder as well. This way, when it's time to start collecting data for the loan forgiveness, you have it all in one place and you're not scrambling to find it. Basically, keep track of who you're paying, when you're paying them, and with what funds you're using to pay them.
3 | stay informed
The third, and perhaps most important point, is stay informed. Hopefully, your loan provider or your accountant has provided you with some useful resources, but if not, or if you're just interested in doing some research on your own, here are a few resources that might be helpful:
U.S. Department of Treasury Paycheck Protection Program Tools & Resources
Small Business Administration Paycheck Protection Program Overview
Hopefully you find these resources useful in navigating the Paycheck Protection Program. In the meantime, we wish the best for you and your business in the coming weeks and months.