Completing a Paycheck Protection Program (PPP) loan forgiveness application seems like a daunting prospect for many small business owners. Don’t worry, we totally get it. There are numerous documents to gather and details to organize. And if you submit an inaccurate or incomplete application, you might not receive the forgiveness you’ve been hoping for.
To put your mind at ease and equip you with the tools for success, we put together this helpful checklist for maximizing your PPP forgiveness amount. Feel free to bookmark it, reference it, and use it to make sure you’ve got all your ducks in a row.
Here are the 2 biggest priorities for your PPP loan funds:
▢ Use the money only for approved expenses
▢ Provide validation that you tracked and used those funds appropriately
The “covered period” for your loan refers to the date range beginning 8 weeks after PPP loan disbursement and ending any time you choose until 24 weeks eligible after PPP loan disbursement.
Shoring up payroll is the main way PPP loans are intended to help small businesses survive this pandemic. Payroll also carries the largest allowable portion of allowed expenses, along with the most nuances.
The number to remember is 60%.
To make sure you’re maximizing your forgiveness amount, spend at least 60% on your payroll. Here are the approved payroll uses that you should be tracking and submitting:
▢ Compensation in the form of 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
Let’s check your progress. Did you spend at least 60% of your PPP funds on payroll? Note that you are actually able to use 100% of the funds for payroll without penalty. If you use less than 60%, you can still have that amount forgiven, but you’ll likely be repaying some of the loan.
If you have any questions on what else might be included for payroll or what to do if you don’t use 60% of your funds for these purposes, check out our FAQs for Loan Forgiveness.
Non-Payroll Expenses Also Eligible for Forgiveness
If you use 40% or less of your PPP loan funds for the following expenses, you can also qualify for forgiveness.
▢ 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
Submitting Your Application
All right, let’s put our checklist into action. You’ll be submitting your PPP loan forgiveness application directly to your lender, and they will submit it to the SBA on your behalf after their initial approval. You can access the application on SBA.gov.
SPECIAL NOTE: Is your PPP loan $150,000 or less? If so, the SBA now allows you to submit this 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
Pretty amazing, right? This streamlined process can definitely make your life easier. You should also be aware that the record retention guidelines for these smaller loans have been reduced to 4 years for employee records and 3 years for compliance records.
Need Help Tracking or Proving your Expenses?
Even with the program details highlighted in this checklist, you’ll still need to adhere to a lot of nuances if you want to maximize your forgiveness. Our professional bookkeepers are happy to help you manage your books and ensure that you’re prepared for your forgiveness application. In fact, PPP Loan Forgiveness is included for our paid subscribers as a free add-on. You can learn more about these services here.
Sunrise is committed to helping you and all of our small business owners get through these challenging times and back to thriving. Please let us know if you have any questions or need clarifications regarding PPP loan forgiveness. Our experts are happy to assist you. After all, we’re in this together.