Understand your PPP loan forgiveness eligibility

Paycheck Protection Program (PPP) loans were the saving grace for many small businesses over the past two months. However, the forgiveness qualifications continue to evolve, leaving business owners confused and wondering if they’ll meet forgiveness requirements.

Initially, it seemed the forgiveness requirement was to use funds within eight weeks for payroll, mortgage interest, rent or utilities, with a caveat that 75% of the loan funds must be used on payroll expenses. The Small Business Administration (SBA) recently relaxed these restrictions by lengthening spending time to 24 weeks (6 months) and now only requiring 60% of funds to be used for paychecks.

Additionally, the number of full-time employees, salaries and wages must be maintained through the duration of the loan. Deviation from these numbers could affect forgiveness. This requirement has stayed consistent.

Later, the SBA added a specification that public companies with “substantial market value and access to capital markets” need to prove their economic need to be eligible for forgiveness. At this time, it is unclear how businesses are expected to prove this need. Loans of less than $2 million would be excluded from proof of financial hardship, as the SBA assumes the economic damage is a result of the pandemic.

No matter the size of the loan, the fund allocation requirements must be met to fulfill forgiveness eligibility criteria. Employers are encouraged to closely track loan spending as proof of compliance. Tracking and keeping stringent records can be cumbersome for business owners.

The strain has further illuminated the benefits of outsourcing payroll services. Outsourcing ensures spend tracking is taken care of and offers access to invaluable expertise. For example, a payroll expert can generate payroll reports that track qualified payroll expenditures. All these strategies could increase your company’s loan forgiveness eligibility.

While some businesses have experienced unreliable outsourced payroll companies during the crisis, Bukaty Payroll & Accounting has remained open and ready to answer PPP loan questions. If you have unresolved loan questions, email sreynolds@bukaty.com.