PPP Loan Forgiveness Tips

June 12, 2020  

The Paycheck Protection Program made billions of dollars’ worth of loans available to businesses across the United States. If you secured one of these loans, or if you’re still hoping to apply for another round, you’ll want to ensure that you meet all the parameters outlined in the program to receive loan forgiveness by following these useful tips.

Use Your Money the Right Way

The federal government program states that you must use at least three-quarters of the loan to cover payroll expenses. You can use the rest at your discretion to pay for rent, utilities or interest on a mortgage payment.

Payroll payment requirements include:

  • Paying your existing employees their current salaries without decreasing their wages.
  • Rehiring furloughed or laid-off workers. If an employee turns down your offer, you can still qualify for loan forgiveness as long as you document their response.
  • Paying yourself for eight weeks maximum, equivalent to what you made over an eight-week period in 2019.

For eight weeks, the most you can pay an employee, including yourself, is $15,385.

Some Questions Are Still Evolving

The best way to work toward loan forgiveness is to ask about anything you’re unsure about. You should approach your loan officer or the U.S. Small Business Administration, which administers the program, when you need answers. For instance, you may wonder if you can use a payment to cover the whole month if you receive the loan several days after your rent is due. Alternatively, would you have to prorate it?

When in doubt, lean toward the most conservative answer. The safer your choices, the less chance you’ll have of violating any loan forgiveness guidance.

Keep Detailed Records of All Transactions

You must prove what you did with every penny of your loan. Keep a detailed record of your checks and receipts. You should also record how much each one of your employees is paid and how many people you have on your payroll. The lender may ask for more documentation than you thought you would have to keep, so detailed notes can protect you.

You may want to set up a separate bank account for your PPP funds. That way, they won’t mix with your other funds and become more challenging to track.

Know Your Time Frame

The moment your loan funding comes through, the eight weeks for loan forgiveness begin. The Small Business Administration has 10 days to deliver your funds after your loan has been approved. Though the government will not approve any new loans after June 30, your loan forgiveness period may extend beyond that day.

Do Not Use the Employee Retention Tax Credit

If you take part in the PPP, you cannot get the Employee Retention Tax Credit. Both are available to businesses affected by coronavirus, so determine which one would be more beneficial for you. If you do not receive forgiveness in full for your loan, you’ll have two years to pay it back with a 1% interest rate. The payback period will begin six months after you receive your funds.

Call BCM Payroll Services, Inc. at 717-264-7374 or fill out our contact form for payroll information and services you can trust.


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