Answered by Aria D. Eckersley
As a general matter, PPP loan funds must be used for permitted expenses only – i.e., payroll costs, mortgage interest, rent and utilities – regardless of whether a borrower intends to apply for forgiveness or not. Under the new Paycheck Protection Program Flexibility Act (discussed in further detail here), the maximum amount of loan funds that can be used on non-payroll costs was increased from 25% of loan proceeds to 40% of loan proceeds. Without further guidance indicating otherwise, the understanding to date is that these thresholds apply for both forgiveness and PPP loan use generally. Ultimately, this is in the spirit of PPP.
Regarding audits, the SBA has advised that in addition to the documents needed for applying for forgiveness, borrowers must also keep all documents supporting their certifications about the necessity of the loan and documents showing the borrower’s material compliance with PPP loan requirements. Borrowers are required to keep these documents in their files for six years after the date the loan is forgiven and/or repaid in full. During that time, the SBA has the right to access the files on request.