Disclaimer: Regulations and guidance from the SBA and the U.S. Department of Treasury on the PPP are evolving rapidly. Please refer to the latest guidance from SBA and Treasury to confirm current program rules.
The Paycheck Protection Program (PPP) is part of the larger government stimulus package, the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Paycheck Protection Program loans are meant to minimize the number of unemployed persons by helping small business owners make payroll through June 30, 2020. PPP loans are designed to help small business owners stay in business during this time of economic uncertainty.
The hope is that if businesses can keep employees on the payroll now, they’ll be in a better position to recover fully. And as a result, fewer people will be jobless and in need of additional federal aid. And if they meet certain criteria, borrowers can request loan forgiveness.
How to help qualify for Paycheck Protection Program loan forgiveness
To improve your chances of having your PPP loan forgiven, you’ll need to meet some requirements.
1. Keep your workers on the payroll
You should have the same number of employees on the payroll as you did between February 15, 2019 and June 30, 2019. If your business wasn’t open then, maintain the number of employees you had between January 1 and February 15, 2020. If you’ve had to lay some employees off since February 15, that’s OK. You’ll just need to hire them back before June 30, 2020.
2. Maintain employee salaries and wages
Keep employees’ salaries and wages as they are. Loans cover annual payroll costs, up to $100,000 per worker. Reducing employee pay by 25% or more reduces your chances of having your loan forgiven. If you’ve already reduced salaries and wages, restore each worker’s normal salary and wages.
3. Record all payroll costs and how you’ve spent your loan
Keep an accurate record of employee payroll costs and how you’re spending your loan. Stay organized and track spending on things like employee benefits and healthcare premiums. You’ll need to prove how you’ve spent the loan if you want to request forgiveness.
Additional qualifying expenses under the Paycheck Protection Program
Paycheck Protection Program loans are intended primarily for payroll costs. So when it comes to whether a loan is forgivable, the SBA anticipates, no more than 25% of the forgiven amount may be for non-payroll costs. But borrowers can still spend funds on other forgivable expenses.
Additional forgivable expenses include:
Employee expenses related to payroll
- Vacation, parental, family, medical, or sick pay
- Allowance for dismissal or separation
- Health insurance premiums and group healthcare benefits
- Retirement benefits
- State or local taxes related to employee compensation
- Cash tips or equivalent for tipped workers
- Business utilities (electricity, gas, and water)
- Communication (phone or internet access)
- Rent or mortgage provided the lease or owner agreement was signed before February 15, 2020
Even if you aren’t able to get your loan forgiven, it may help to know that loan terms are generous. And if your non-payroll costs exceed your payroll costs, the Small Business Administration has other loan programs that may provide relief.
The resources described above are made available to businesses within the United States of America.
Regulations and guidance from the SBA and the U.S. Department of Treasury on the PPP are evolving rapidly, and the information contained herein may be outdated. Please refer to the latest guidance from SBA and Treasury to confirm current program rules.
Given the large demand for additional authorized Paycheck Protection Program funds, not every qualified Paycheck Protection Program applicant will receive a loan.
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