How to Make Sure Your PPP Loan is Forgiven

Congratulations to those who have received the Paycheck Protection Program (“PPP”) loan. These last few weeks have been stressful for all. Now that you have these funds available to retain your employees and continue to operate your business, it is important to have clear accountability for the funds so the PPP Loan is forgiven and not turn into just another loan.

We advise all clients to deposit PPP funds into a designated bank account and pay all allowable expenses from that account for an easy audit trail.

How much of my loan will be forgiven?

You will owe money when your loan is due if you use the loan amount for anything other than payroll costs, mortgage interest, rent, and utility payments over the 8 weeks after getting the loan. Due to the likely high subscriptions, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs. You will also owe money if you do not maintain your staff and payroll.

  • Number of staff: Your loan forgiveness will be reduced if you decrease your full-time employee headcount.
  • Level of payroll: Your loan forgiveness will also be reduced if you decrease salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019.
  • Re-hiring: You have until June 30, 2020, to restore your full-time employment and salary levels for any changes made between February 15, 2020, and April 26, 2020.

What can I use these loans for?

You should use the proceeds from these loans on your:

  • Payroll costs, including benefits;
  • Interest on mortgage obligations, incurred before February 15, 2020;
  • Rent, under lease agreements in force before February 15, 2020; and
  • Utilities, for which service began before February 15, 2020.

What counts as payroll costs?

Payroll costs include:

  • Salary, wages, commissions, or tips (capped at $100,000 on an annualized basis for each employee);
  • Employee benefits including costs for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payments required for the provisions of group health care benefits including insurance premiums; and payment of any retirement benefit; and
  • State and local taxes assessed on compensation

What payments for retirement benefits are allowed?

  • 401K safe-harbor match;
  • Profit-sharing plan contributions;
  • There is no definitive guidance if you can use the money to fund 2019 retirement plan contributions or only 2020;
  • To be on the safe side we suggest our clients only use PPP funds for 2020 retirement benefits. We strongly suggest you discuss your retirement plan design with your third party administrator (“TPA”) as amendments to the plan might be necessary to pre-fund 2020 profit-sharing plan contributions.

Does the PPP cover paid sick leave?

Yes, the PPP covers payroll costs, which include employee benefits such as costs for parental, family, medical, or sick leave. However, it is worth noting that the CARES Act expressly excludes qualified sick and family leave wages for which a credit is allowed under sections 7001 and 7003 of the Families First Coronavirus Response Act (FFCRA).

What counts as utilities?

Utilities include:

  • Electric;
  • Water;
  • Internet;
  • Telephone

How can I request loan forgiveness?

You can submit a request to the lender that is servicing the loan. The request will include documents that verify the number of full-time equivalent employees and pay rates, as well as the payments on an eligible mortgage, lease, and utility obligations. You must certify that the documents are true and that you used the forgiveness amount to keep employees and make eligible mortgage interest, rent, and utility payments.

The lender must make a decision on the forgiveness within 60 days.

*** Lenders are still waiting for guidance to be issued on the forgiveness process and the format of the application for forgiveness.

What is my interest rate on the amount that is not forgiven?

1.00% fixed rate.

When do I need to start paying interest on my loan?

All payments are deferred for 6 months; however, interest will continue to accrue over this period.

When is my loan due?

In 2 years.

Can I pay my loan earlier than 2years?

Yes. There are no prepayment penalties or fees.

Loan forgiveness will be provided for the sum of documented payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities. Due to the likely high subscription, it is anticipated that not more than 25% of the forgiven amount maybe for non-payroll costs.

For more information on how your PPP Loan affects your business, give us a call at 407-650-9088 or email

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