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Are Your PPP Loans Going to Be Forgivable?

Congratulations! You’ve received your PPP loans after countless hours of financials, spreadsheets, and frustrating waiting. Much needed relief is here. This money will be used to alleviate the stress of payroll, rent, and utilities. But unfortunately, your work is not done. Just as important in getting that loan is ensuring as much of it is as forgivable as possible. The SBA just released its latest guidance and its still just as tricky as you might expect. Not to worry - here’s some of the best tips to ensure you get as much of that loan forgiven as possible.

One of the most exciting notices that was announced with the PPP forgiveness guidance is the allowance for alternative payroll periods. If your business pays employees biweekly, you are able to adjust your 8 week loan period to coincide with your pay periods. Meaning, if your loan began in the middle of a pay period, you are able to slide the time period to match with pay periods. If calculated properly, you might actually be able to get more than 8 weeks of payroll forgiven.

Remember that very exciting possible $10,000 EIDL advance that was going to be forgivable? Not as forgivable as we once thought. If you received this advance and PPP loan funds, your total forgivable amount will be reduced by any EIDL grant amounts. During the application process, many organizations did not disclose any EIDL advance monies because most of those had yet to be processed. However, it appears now they will be collecting these funds back through the PPP loans.

As of right now, it sounds like pre-payments for rent will be allowed. There is some speculation that this may be corrected, but as of right now, there is language to believe that pre-payments will be forgiven for rents. This is not true for other areas, like mortgage interest, but as of now, it appears true for rental agreements. Additionally, rental and lease agreements for business assets can be forgivable - this can include rental agreements for things like computers, printers and other job related leases.

Lastly, consider opening a new bank account to use solely for your forgivable expenses. This can simplify the tracking process significantly. Make sure you are only pulling out forgivable expenses though. For example, don’t pull all of payroll out of this account, because federal taxes are not forgivable. You can transfer amounts to other accounts for payments. It is best to try to open this account at the bank that you received your loan through, which for most would be the one that you use for your business banking needs.

All businesses are different and as such, we encourage you to speak with your financial representatives and legal counsel for final decisions. The initial forgiveness will be completed by your banking institution, so be sure to check with them on any gray areas. Additionally, the SBA will be continuing to issue guidance on this and everything is subject to change (much like it did during the PPP application process).

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