If you were one of the businesses that were fortunate enough to get approved for and receive funds through the Paycheck Protection Program, or are hoping to apply in the future, how much of your loan is forgiven is based on a number of factors. While we expect further guidance on PPP loan forgiveness, here is what we know now:
-The amount of your loan can be forgiven up to the amount of acceptable expenses (listed below) and payments made during the 8-week period (covered period), which begins on the date of the receipt of the loan from the lender.
-To maximize loan forgiveness, at least 75% of the loan amount must be used for payroll costs. Not more than 25% of the loan can be used on non-payroll costs.
-The amount of your loan forgiveness will be reduced if you don’t maintain the same number of full-time employees during the covered 8 week period, or if wages are decreased by more than 25% for employees making less than $100,000 per year. If you have laid off employees or reduced their wages, you should hire them back and reinstate their salaries.
-If you follow these guidelines, your PPP loan can be forgiven up to the full amount of the loan, as well as any accrued interest.
-Payroll costs (including payroll benefits)
-Interest payments on any covered mortgage obligation incurred before 02/15/2020
-Rent payments under a lease beginning prior to 02/15/2020
-Utility payments for services that began prior to 02/15/2020 (It is unclear at this time what utilities are eligible for forgiveness, we are waiting for further direction from the SBA)
It is not required, but it would be smart to open a separate bank account so it’s easier to track PPP loan funds. Make sure that you start tracking your expenses as soon as you receive the funds from your loan; your books should be accurate and expenses categorized, including dates.
Remember that while the SBA oversees the Paycheck Protection Program, the loan comes from your lender. Make sure you understand your lender’s rules for loan forgiveness, and don’t forget to apply for loan forgiveness when the time comes.