If you were one of the businesses who successfully secured funds from the Paycheck Protection Program (PPP), it is now imperative you utilize those funds appropriately—in terms of timing and usage—in order to qualify for the eligible loan forgiveness. Additionally, you will need to keep the appropriate documentation of expenses to apply for the loan forgiveness, not to mention in the case of an audit. Here we review the type of expenses that should be utilized with the PPP funds in order to secure the loan forgiveness as well as what to consider in terms of documentation.
Timing of Expenses
First and foremost, forgiveness will be granted for the portion of the funds you utilize on expenses incurred during an eight-week period from the time the loan funds are received. Many businesses received those funds last week, so if funds were received on Friday, April 17, 2020, you should be tracking eligible expenses between April 17 and June 12, 2020.
Use of Funds
Depending on how much your business qualified for in terms of PPP funds you will want to make a concerted effort to utilize all or most of those funds for expenses that qualify for the loan forgiveness under the program.
For this eight-week period, you likely have three to four payrolls that would qualify for appropriate use of the PPP funds eligible for forgiveness, so this is a good place to start. In addition to salaries, wages, and commissions, eligible payroll costs for forgiveness purposes can include retirement benefits, severance, vacation time, as well as parental, family, medical, or sick leave expenses. It is important to note this cannot exceed more than $100,000 per employee during this eight-week period. Additional payroll related expenses include group health insurance, retirement benefit costs, and state and local payroll taxes.
Beyond payroll expenses, PPP funds that qualify for forgiveness also include payment of interest on mortgage loan(s), rent with an existing lease agreement, utility expenses, and interest on other debt obligations incurred prior to receiving the loan.
In order to receive the loan forgiveness, you will have to apply through the lender that secured the PPP funds for your business. The application for forgiveness will need to include documentation verifying the number of employees on payroll, their pay rates, and payroll tax filing information.
You will also need to include verification on payments made on your lease or rent obligations, as well as your utility expenses. Finally, there will need to be certification from the business and likely the lender that all documentation provided is legitimate and truthful and that the funds were used in accordance with the PPP guidelines for forgiveness.
Here you will find PPP Forgiveness Planning Worksheet to estimate your loan forgiveness, to track expenses incurred, and a checklist of the information you will need to provide to present to the bank for loan forgiveness. This is a good template to start with to keep track of these expenses and the appropriate documentation to submit for loan forgiveness following the 8-week period. Your lender may have specific forms for you to complete but by using these worksheets to track your expenses as they are incurred you will be collecting the information you should need for any lender provided forms.
** With the ever evolving changes of the COVID-19 stimulus opportunities, please refer to our Response to COVID-19 page for the most up to date information. Please contact us if you have specific questions. **
If you have questions about the PPP loans, how to best utilize these funds to acquire the loan forgiveness, Selden Fox can help. Please do not hesitate to call us a 630.954.1400 or click here to contact us.
Our auto dealer clients and contacts should contact
Tom DeSimone directly with assistance on their PPP loans.