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Don’t Panic: The Small Business Guide to PPP Forgiveness

If you are one of the millions of small businesses approved for an SBA Paycheck Protection Program loan, the next step is to consider and prepare for forgiveness of your loan. SBA forgiveness is not automatic. You’ll need to apply, and there are a number of requirements.

What expenses qualify for PPP loan forgiveness?

Remember, the PPP loan is intended to help small business keep employees on payroll. Loans may be forgiven if an eligible small business uses it for full and part-time employee wages during the first eight weeks after the loan money is received.

  • 75% of the loan amount must be used for payroll costs. These include:
    • Employee salaries – Salary cap is $100,000 per employee
    • Group health care benefits, retirement benefits, and state/local taxes on employee salaries
  • No more than 25% of the loan amount can be used for non-payroll costs in place prior to February 15, 2020. These include: mortgage interest, rent and utilities

Get prepared

While specific guidance has not been given by the SBA or Treasury, you will likely have to provide proof of qualifying expenses, so make sure to keep very good payroll and expense records. Some small businesses may want to consider working with a tax professional or a CPA for help with recordkeeping.

The following actions may increase your likelihood of forgiveness after the eight-week period:

  • Keep the PPP funds separate: Consider putting the loan into its own designated account to better keep track of the funds.
  • Keep disciplined records: Create account codes or sub-codes so there’s a paper trail for qualified expenses.
  • Keep supporting documents: Stay organized with your documentation of PPP fund usage – especially for payroll, interest, rent, and utilities payments.
    • Payroll: Retain payroll registers and proof of ACH transfers. If you outsource to a professional employer organization (PEO), save your payroll invoice that shows payroll costs and employee benefits.
    • Utilities: Keep invoices and statements for electric, phone, internet, gas and heating providers.
    • Rent and mortgage interest: Keep proof of payments.

If you have questions regarding the forgiveness process, talk with your lender. Each bank may have its own forgiveness application process.

Please keep in mind, these are just a few of the things your small businesses may want to consider, but they are by no means all the factors you may need to take into account to qualify for PPP loan forgiveness. 

PPP Webinar“Don’t Panic: The Small Business Guide to PPP Forgiveness”

Bank of the West has teamed up with the Nasdaq Entrepreneurial Center to bring you a helpful webinar about navigating the road ahead to PPP Forgiveness. You’ll gain insights on how to prepare for forgiveness, how to avoid potholes along the way, and why you shouldn’t panic. Click here to watch the webinar.

HRinDemand is offering free HR consultation to help businesses cope with the challenges that we are all facing. Please take advantage of the up-to-date information available on the HRinDemand blog, the FAQs section, and our valuable resources page. If you are unable to find the answers you need or merely need to talk, contact Melissa Marsh at 775-400-1322.

Melissa Marsh, SPHR, SHRM-SCP, is a human resources consultant and founder of HRinDemand, a human resources company in Reno, NV, offering expert guidance and easy-to-use tools to help small businesses with employment regulations, compliance, employee relations, and company growth.

Source:

“Start Planning to Get Your Loan Forgiven.” Bank of the West BNP Paribas, May 2020, www.bankofthewest.com/ppp-forgiveness.html.

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