Maximize SBA Loan Forgiveness

The organizational impact of COVID-19 has given way to a variety of relief provisions. These relief provisions are designed to help keep employees on payroll, maintain operations and keep the doors open in the wake of the pandemic.

One of the most popular options for relief provision funding is the Paycheck Protection Program (PPP). Paycheck Protection Program loans are available to assist organizations in maintaining a workforce during the COVID-19 pandemic. While initially structured as a loan from an SBA approved lender, a recipient can take steps to achieve potential or total forgiveness of the PPP loan. A key provision for the PPP loan forgiveness is that the majority of the funding (60 percent) must be used for eligible payroll costs.

Maximize Your Loan Forgiveness Now

Steps to Maximize Loan Forgiveness
While many organizations may qualify for some level of forgiveness through the PPP loan program, good planning and proper documentation can help ensure you maximize your loan forgiveness potential.

Key steps include:

  1. Remembering what expenses are covered under the Paycheck Protection Program. Eligible expenses include payroll, mortgage interest (as long as it was signed before February 15, 2020), business rent or lease payments (as long as it was put into effect before February 15, 2020) and utilities (as long as the service began before February 15, 2020).
  2. Understanding the impact of payroll. At least 60 percent of loan proceeds must be used to fund payroll costs. Failure to meet the 60 percent threshold results in a reduction in the forgiveness amount of the PPP loan.

    The PPP loan forgiveness amount can also be reduced if you do not maintain the average number of full-time equivalent employees during the covered period or if you reduce salaries of specific employees during the covered period.
  3. Tracking expenditures. Eligible expenses have to be tracked over the eight-week covered period, starting with the first payment made by your SBA approved lender. These expenditures may give rise to partial or complete forgiveness.

    An important note here is that eligible nonpayroll costs under PPP loans can be paid during the covered period or incurred during the covered period and later paid on or before the next regular billing date, even if that date falls outside of the 24 week covered period (unless you choose the original 8-week covered period).
  4. Apply for forgiveness. The PPP loan forgiveness application has been issued and requires a documentation list that a borrower must submit to their lender. These include:
  • Bank account statements
  • Tax forms
  • Reciepts
  • Average FTE counts
  • Documents that verify non-payroll expenses

PPP loan forgiveness will be complex.

With more guidance issued related to PPP forgiveness criteria, it’s important to understand how to get the most return.

Additional Resources

While one of the most popular relief programs, the PPP has also caused substantial confusion as guidance on both eligibility and forgiveness continues to be issued. We have developed tools and resources to help organizations understand this guidance and how it impacts them and their PPP funding.

Weekly PPP Update

PPP loan forgiveness continues to be a constant topic of discussion among borrowers, lenders and business advisors alike. Guidance continues to be issued regarding PPP forgiveness and eligibility. Eide Bailly’s Adam Sweet has been monitoring the PPP and will provide weekly updates on what to do and what to expect.

Have questions?