April 4, 2020 Payroll en_US The Paycheck Protection Program offers up to $10 million to cover payroll, employee benefits and other operating expenses. https://quickbooks.intuit.com/cas/dam/IMAGE/A3x2n4cio/using-paycheck-protection-program-loan.jpg https://quickbooks.intuit.com/r/payroll/payroll-protection-expenses/ How can I spend a Paycheck Protection Program loan?
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How can I spend a Paycheck Protection Program loan?

By Myranda Mondry April 4, 2020

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Eligible payroll costs | Excluded payroll costs

Note: The information contained in this article only applies to certain small businesses and other eligible organizations. For example, effective April 20, 2020, if you filed or will file a 2019 IRS form 1040 Schedule C, other rules apply.

The Paycheck Protection Program (PPP) is intended to provide a way for small business owners to keep their workers on the payroll and maintain wages. The Small Business Administration (SBA) classifies PPP loans as 7(a) small business loans. Borrowers can apply for up to $10 million, with a maturity of 2 years and an interest rate of 1%.

Loans issued under the Paycheck Protection Program can be used for eligible payroll costs, mortgage interest, rent, utilities, interest on certain other debt obligations, and refinancing an Economic Industry Disaster Loan (EIDL) made between January 31, 2020 and April 3, 2020 (though at least 75% of the loan proceeds must be used for negligible payroll costs). PPP loans may be forgivable, in whole or in part, if certain requirements are met.

Eligible payroll costs may include:

  • Individual employee compensation in excess of annual compensation of $100,000 per year
  • Compensation for employees who live outside the U.S.
  • The employer’s share of certain payroll taxes
  • Qualified sick and family leave wages under the Families First Coronavirus Response Act

Excluded payroll costs may include

  • Individual employee compensation in excess of annual compensation of $100,000 per year
  • Compensation for employees who live outside the U.S.
  • The employer’s share of certain payroll taxes
  • Qualified sick and family leave wages under the Families First Coronavirus Response Act

For a comprehensive list of included and excluded costs, please refer to the latest guidance from SBA and Treasury.

Excluded payroll costs may not count towards the 75% of funds that must be used for payroll costs. While SBA 7(a) small business loans may generally be used for a variety of business purposes, such as purchasing land or buildings, machinery or supplies, working capital, or refinancing current business debt, using a PPP loan for expenses unrelated to payroll, rent, utilities, interest on mortgage and certain other debt obligations and EIDL refinancing is not permitted under the PPP loan program.

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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 the 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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Myranda is a content creator and researcher at Intuit. She graduated with an English and journalism degree from Boise State University and currently resides in Boise, Idaho. She’s passionate about dogs, music, and helping small businesses succeed. Read more