There will always be purists who like to stick with the original form of things. Perhaps you’re one of them. Here’s a little quiz to help you decide:
- Do you prefer The Godfather to The Godfather Part II?
- Do you prefer classic Coke to Diet Coke?
- Do you consider the new version of Saved By the Bell to be blasphemous?
If you answered “yes” to 2 or more of these questions, you might be a purist. And that’s just fine. There are plenty of examples of things in this world that only get worse as they move on from the original.
The Paycheck Protection Program (PPP), however, might just be an exception to the rule. The first round of PPP loans launched in 2020 and did a lot of good for a lot of American businesses. But the recently-released sequel also boasts plenty of great features.
One of the most popular improvements is the streamlined forgiveness application for businesses that receive PPP loans of $150,000 or less. If you fall into this camp, you’ll only need to submit a 1-page application that lists factors such as:
- SBA PPP loan number
- Lender PPP loan number
- PPP loan amount
- PPP loan disbursement date
- Employees at time of loan application
- Employees at time of forgiveness application
- The covered period
- Amount of loan spent on payroll costs
- Requested loan forgiveness amount
Don’t fret if your loan amount exceeds $150,000. The application for these larger loans isn’t quite as lean, but it is still very manageable.
You should be aware that there have also been updates to the approved uses for PPP loans. As long as you only spend the money on eligible costs and expenses and meet the other program criteria, you can qualify for up to 100% forgiveness of the loan’s principal. Eligible costs and expenses include:
- Payroll costs such as:
- Salaries, wages, commissions, or similar compensation up to $100,000
- Payment of cash tips or equivalent
- Payment for vacation, parental, family, medical, or sick leave
- Allowance for dismissal or separation
- Payment of retirement benefits
- Group vision, dental, disability, or life insurance
- Payment of state or local taxes assessed on the compensation of employees
- Healthcare costs related to the continuation of group healthcare benefits during periods of sick, medical, or family leave, as well as insurance premiums
- Mortgage interest payments (but not prepayment or payment of the mortgage principal)
- Interest on any other debt obligations incurred before February 15, 2020
- Refinancing an SBA EIDL received between January 31, 2020, and April 3, 2020
- Covered expenditures such as business software or cloud computing services that facilitate:
- business operations
- product or service delivery
- the processing, payment, or tracking of payroll expenses, human resources, sales, and billing functions
- accounting or tracking of supplies, inventory, records, or expenses
- Covered property damage costs
- Covered supplier costs
- Covered worker protection expenditures
Remember that payroll is the main priority for these loans, as the name of the program suggests. So you need to spend a minimum of 60% of your PPP funds on payroll costs in order to qualify for forgiveness.
This article is only intended to introduce you to a few of the updates to PPP loans. Numerous intricacies will apply to your business’s unique situation, so it’s crucial to do your due diligence to ensure your compliance and get the largest amount of money forgiven as possible.