by Karen Stern
The U.S. Small Business Administration (SBA) began accepting Paycheck Protection Program (PPP) loan forgiveness applications on August 10. Partial or complete loan forgiveness is not automatic. Thorough paperwork must be filed, and funds must be spent on eligible expenses.
Here are four tips to help prepare you for PPP loan forgiveness:
1. Use the funds on eligible expenses. Generally, PPP loans are forgivable if your business used at least 60% of the loan for eligible payroll costs over 24 weeks. Non-payroll costs, including mortgage interest, business rent and utilities, are also eligible for forgiveness, within certain eligibility requirements.
2. Record everything. Keep track of when you received the loan, the accrued interest on the loan, and each time you spent loan funds.
3. Maintain employee headcount. It is important that your employee headcount is the same as what it was when you applied, so consider bringing back furloughed or laid off employees or hiring new employees.
4. Provide thorough documentation. When applying for loan forgiveness, the SBA requires you to provide proof of payroll costs during the loan period, interest on mortgage payments, rent payments, utility payments, and the average number of full-time equivalent (FTE) employees on payroll.
The PPP loan forgiveness process is likely to be time consuming and complicated, more so than the PPP application process itself. Calculations are complex, and supporting documentation needs to be thorough and succinctly compiled.
If the paperwork you file is unsatisfactory, you could face a government audit of your files to verify the information, which would hold up your loan forgiveness.
If you have questions or would like assistance applying for your PPP loan forgiveness, please contact Karen Stern, Partner in Charge, Entrepreneurial Services Group at Brown Smith Wallace, at 314.983.1204 or firstname.lastname@example.org.
Karen Stern, CPA, (email@example.com), partner in charge, Brown Smith Wallace Entrepreneurial Services Group, provides tax and accounting services for companies ranging from start-ups to $20 million in revenue.