Through the Payment Protection Program (PPP), more than $500 billion in loans have been processed to help small businesses during the Covid-19 crisis. While the extra funds came as a lifeline to many businesses, it has arrived with some caveats.
For starters, in order for the loan to be forgiven, the business must use at least 75 percent of the funds within 8 weeks of receiving them. And even then, the money must be used on hiring back employees or finding new ones to fill positions.
The rules behind the PPP loans are making it hard for many businesses, especially those – like coffee shops and hair salons – that still may be ordered to remain closed during this time.
The main issue is having to start a business back up in such a short amount of time. Many businesses need more than eight weeks to return to some state of normalcy.
What Types of Debt Are Forgiven?
Under the guidelines for getting the PPP loan forgiven, a business must use 75 percent of the funds on payroll costs.
These costs would include:
- Salary, wages, and health benefits. It also includes vacation, parental, family, medical, or sick leave
- Mortgage interest – if the mortgage was signed before February 15, 2020
- Rent – If the lease was signed and in effect before February 15, 2020
- Utilities – As long as the service began before February 15, 2020
All of the expenses that are within those categories will qualify for the forgiveness.
Some Conditions Still Apply
- Your business can only use the money on expense incurred during the eight weeks after you received the loan.
- At least 75 percent must be used towards payroll, however, independent contractors cannot be included.
- Your business must maintain the number of employees you have on your payroll
If you need help understanding and calculating the number of employees you need to maintain, you can see the PPP Rules on Rehiring Employees.
Third-Party Accounting Firms Can Help
If you need assistance in spending the PPP loan that your business received properly so that it can be forgiven, then a third-party accounting firm can help. Having a good payroll system in place when it comes to tracking the PPP loan money spent on salaries is a good idea. Although your business may have faced, and is still going through, economic hardship during this time, a third-party business that can handle the accounting side and keep everything organized can be an even greater lifeline than the loan itself. After all, with the right decisions, the loan can be forgiven.
LTD Global Is Here To Help
Need help with your PPP payroll and accounting calculations? LTD Global is here for you during this time. LTD Global has been assisting small businesses and non-profits with their accounting needs for years and we can help your organization stay on track during this period of economic stress. To find out more on how we can help, contact info@ltdglobal.com for more details.