How to Track PPP Loan Expenses for Forgiveness
Paycheck Protection Program (PPP) loans may potentially be the most attractive government loans in history. 1% fixed APR? Check. High approval rate? Check. On their own, those 2 features would have been enough to win the hearts of business owners who desperately needed a financial lifeline in the face of the coronavirus pandemic. But we know that’s not the primary draw for most because PPP loans came with an even more appealing feature: potential loan forgiveness.
What expenditures do you have to track for forgiveness?
Allowed uses for potential loan forgiveness fall into 3 primary categories: payroll-related expenses, rent/mortgage interest payments, and utilities. The full list of what falls into those categories includes:
- Paid vacation, maternity/paternity, family, medical, and sick leave
- Allowances for dismissal or separation
- State or local taxes assessed on employee compensation
- Healthcare benefits (including premiums for insurance)
- Retirement benefits
- Rent for business locations
- Utilities like gas and electric
- Interest on certain mortgage obligations
How to Track Your Expenses to Best Prepare for Loan Forgiveness
It’s not enough to spend your PPP loan on approved uses—you have to adequately prove to the SBA that you’ve done so in order to qualify for loan forgiveness. These steps will set you up for success.
Track ‘Em As You Spend ‘Em
Inputting all your PPP expenditures at the end of your eligible loan forgiveness period is the bookkeeping equivalent of cramming for the test the night before. Sure, you may still pass, but it’s going to cause more stress and at least one sleepless night.
Set yourself up for success by tracking your expenses as you incur them. It’ll reduce stress and leave you better prepared. Plus, if any issues arise, you’ll have more time to deal with them.
To increase your likelihood of a smooth and successful loan forgiveness application, you want to correctly categorize each of your expenses. This can be done manually, or your accounting software may be able to automatically categorize each expense, reducing some of the guesswork and manual labor. ‘Cause you don’t need another tedious task preventing you from getting back to running your business.
Provide Necessary Documentation
Like a Real Housewife at a reunion special, the SBA will say, “Show us the receipts.” You’ll need to show payroll documents and proof of utility bills/payment and rent or mortgage interest payments. Bookkeeping software can seamlessly add this to each expenditure type so that it’s well-organized and ready for when the SBA wants to check your work.
Use Bookkeeping Software to Reduce the Chance of Errors
Tracking your expenses through software can help you in myriad ways. As we mentioned, it makes categorization a breeze. You can easily attach receipts and provide necessary documents. Plus, the software will ask you for the required information for effective tracking, reducing your risk of making a mistake. When it comes to loan forgiveness, you don’t want to run the risk that penciled-in records will forfeit your chances.
Outsource Your Loan Forgiveness Preparation
You can take the unease and effort out of the loan forgiveness preparation process by working with Sunrise to prepare your loan forgiveness application. Here’s how we’re helping small business owners:
- We’re making it simple and easy to track expenses.
- We automatically categorize expenses in approved categories.
- We’ll provide you with a complete packet to submit to your lender.
- We provide support if you have any issues after submitting the application to your lender.
- Our interface is pretty, which let’s be honest, can make bookkeeping feel like less of a drag.
Learn more about how Sunrise can help take the headache out of the PPP loan forgiveness process.