Congratulations, You Got a PPP Loan – Now What?

April 14, 2020

We’ve mapped out eight tips for eight weeks. And your clock starts…

While the PPP guidance continues to evolve, there are four general phases of this program:

  1. Application;
  2. Approval;
  3. Use; and
  4. Forgiveness.

That means if you’ve learned that your application was approved, you’re already half way there. Once your company receives the PPP funds, an eight-week “use” clock starts ticking. So, in order to manage your use wisely, you should prepare with a plan for maximizing forgiveness.  

 

Eight Tips for Your Eight Week Use:

  1. Maintain an open line of communication with your lender. This will help you manage your timing and accounting expectations.
  2. Open and deposit the PPP loan funds into a separate bank account. Do this with your lender to ensure a clean audit trail.
  3. Prepare to carefully document. You’ll need to document and support your eight-week expenses for your lender.
  4. Create a balance sheet. This will account for the authorized use of PPP funds and be useful in prove-up of forgiveness.
  5. Manage and document authorized expenses. As expenses are incurred, make sure you’re documenting them (i.e., payroll should be run on the same cycle if possible – if not possible, consider running a special payroll within the eight weeks in order to pay all payroll expenses incurred during that period, rent and utilities should be paid as they become due).
  6. Carefully monitor how the funds are used. Are they consistent with your plan? To qualify for loan forgiveness, you must use at least 75 percent of the funds for payroll costs, as defined by the CARES Act. The “other” 25 percent of the loan funds may be used to cover eligible non-payroll costs that are incurred during the eight-week period, which are: rent from a pre-existing lease, interest payments on mortgages, interest on pre-existing loans and utilities.
  • Keep in mind, forgiveness may be reduced if either of the following occurs:
  • Employees who made less than $100,000 of compensation in 2019 have their compensation reduced by 25 percent or more; OR
  • The number of full-time employee equivalents is less than the same number of employees during (A) either February 15, 2019, through June 30, 2019 or (B) January 1, 2020, through February 29, 2020 [you choose the more favorable period to apply].
  1. Avoid any misuse of the funds. Business owners using the funds for fraudulent purposes are subject to criminal charges.
  2. Reconcile expenses. This should be done daily and weekly with your plan to make certain calculations are consistent with the forgiveness parameters to ensure the prove-up with your lender will be complete and accurate.

 

We’re in this together. How can we help you navigate the use phase to maximize forgiveness?

 

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