How to Get the Most out of Your PPP Funds

As millions of eligible companies are now starting to receive their Paycheck Protection Program funds, it’s essential to understand how you can maximize your benefits.

We recently covered the expenses that are subject to forgiveness, along with the calculation to determine how much of the loan should be forgiven. If you’d like to read more about that, please click here.

In this article, we will be sharing some steps and tactics you can take to comply with the program and get the most out of it.

How to Use Your PPP Loan to Provide the Greatest Benefit to Your Company

1. Create a plan.

From the day you receive your PPP loan proceeds, an eight-week clock starts ticking. What your company does during these eight weeks will determine the loan forgiveness amount. Preparing beforehand will help you prioritize and spend with intention.

2. Document everything.

You can bet that your bank will request supporting documentation to validate your calculations and information. Have it on hand and ready to present. 

3. Segregate the costs.

You may want to segregate the costs that you use the PPP loan amount for in your chart of accounts/financial records. This may facilitate your ability to keep track of how much of the PPP loan you have spent and aid in the documentation to support the forgivable amount.

4. Monitor the funds.

The rules of loan forgiveness are stringent. You need to spend the loan proceeds on essential expenses, with 75% of the funds going toward payroll costs. Carefully monitor where your loan proceeds are being spent and make sure you stick to your original plan.

5. Understand how loan forgiveness can be reduced.

The PPP loan was ultimately created as a way to support employers so they could continue to pay their employees during the coronavirus outbreak. Therefore, there are two calculations you need to complete based on your payroll to determine if there are any reductions in your loan forgiveness amount.

The first calculation is focused on your employee headcounts, while the second looks at the salaries for each employee.

6. Understand the limitations of using other relief programs.

The Employee Retention Credit and the Deferral of Payroll Taxes cannot be used with the PPP loan. The Families First Coronavirus Response Act credits can be used with the PPP loan; however, payroll costs must be reduced for amounts claimed under the FFCRA credits.

Click here to read more about the interactions between relief options.

7. Know the loan repayment details.

If any of your PPP loan amounts are not forgiven, you will have two years to pay off the loan with 1% interest, which will start six months after the date of the loan. While interest payments can be deferred for six months, interest will still accrue. Any interest-only payments would reduce your accrual.

Have Questions? We Are Here for You

Whether you have already been approved for your PPP loan or you are still in the waiting game, it’s an excellent time to get familiar with how you can maximize your benefits.

Please don’t hesitate to reach out to us with ANY questions you may have. We are working hard to make the complex simple for you during these times.

Visit our COVID-19 Resource Center to keep up with our latest updates and resources.