The Paycheck Protection Program is designed to help small businesses to continue paying their employees while closed or experiencing reduced sales due to the coronavirus pandemic. When your small business receives the Paycheck Protection loan, you could be entitled to having your loan forgiven by the lender. To help your small business achieve the highest amount of loan forgiveness, not to exceed the principal loan amount and accrued interest, your small business coaches at Bryant Consultants are providing tips on how to get your Paycheck Protection loan forgiven.
Uses of Your Paycheck Protection Program Loan that Count Towards Forgiveness
The following are items that may be covered by loan forgiveness but are not the only allowed uses of the Paycheck Protection Program loan. Although you are not required to spend all of your loan proceeds within the first eight weeks, any amount spent after the eight weeks will not be eligible for loan forgiveness. Also, loan proceeds spent on covered expenses during the eight weeks are the only expenses that will be considered for forgiveness.
- Payroll costs defined in the statute
- Rent payments under leases dated before February 15, 2020
- For designated employers identified in the statute, additional wages paid to tipped employees
- Mortgage interest payments on mortgages incurred during the ordinary course of business before February 15, 2020
- Utility payments such as water, transportation, telephone, gas, electricity, or Internet service under agreements dated before February 15, 2020
Reductions That May Impact Your Forgiveness Amount
- Reduced Staff – The amount of forgiveness allowed may be reduced based on the average number of full-time equivalent employees you employ during the eight-week eligibility period after receiving your loan. Small business employers may choose the period of February 15, 2019, through June 30, 2019, or January 1, 2020, through February 29, 2020, to use as a comparison. However, seasonal employers must use February 15, 2019, through June 30, 2019. Also, your business will not be penalized for reductions in the number of full-time equivalent employees between February 15, 2020, and April 26, 2020, as long as the reductions are addressed and eliminated by June 30, 2020
- Reduced Employee Salary – The amount of forgiveness allowed may be reduced based on the reduction in total salary or wages for any employee during the initial eight-week period. The reduction cannot exceed 25% of the total wages or salary earned in the most recent full quarter of employment before the receipt of the Paycheck Protection Program loan. Ensure to omit employees who received wages or a salary exceeding $100,000 in 2019. Your small business will not be penalized for reductions of wages or salary between February 15, 2020, and April 26, 2020, as long as the reductions are addressed and eliminated by June 30, 2020.
- Non-Payroll Cost Use – No more than 25% of the Paycheck Protection Program loan is to be used for non-payroll costs. Those expenses which exceed the 25% limit will not be considered for loan forgiveness.
- Economic Disaster Injury Loan – If your small business received a loan through the Economic Disaster Injury Loan program, it would not be considered for forgiveness.
How to Prepare for the Forgiveness of the Paycheck Protection Program Loan
After the initial eight-week period, you may apply for loan forgiveness through the lender. Your lender is responsible for correct calculation and determination of loan forgiveness amounts and eligibility.
To help you prepare for the application process, organize the following documents
- Employee pay rates
- Payroll tax filing information
- Number of employees on the payroll
- Utility payments within the eight-weeks following loan disbursement
- Paid payroll costs within the eight-weeks following loan disbursement
- Rent or lease payments within the eight-weeks following loan disbursement
- Mortgage interest payments within the eight-weeks following loan disbursement
- Any information from an advance received under the CARES Act EIDL Emergency Grant program.
Small Business Consultants
Knowing how to get a portion or all of the Paycheck Protection Program loan forgiven could help reduce the financial impact on your small business. However, the outlined guidelines must be followed to ensure you are eligible to have a portion forgiven. If you need help using your Paycheck Protection Program loan effectively or would like to speak with someone about the forgiveness process, contact a small business consultant at Bryant Consultants for a free consultation by calling (877) 768-4799 or schedule a consultation online. We also will continue to provide frequent updates throughout the coronavirus pandemic. To make sure you receive these updates, follow us on Facebook and Instagram.
