PPP Loan Forgiveness
A few months ago, the government announced several economic stimulus and recovery programs directed at helping small businesses and non-profit organizations, including churches and other houses of worship, during this crazy time of uncertainty.
In the weeks that followed, I received numerous calls asking for assistance with pulling forms, making calculations, and printing reports for the purpose of applying for various government-funded programs, including the Paycheck Protection Program (aka PPP Loan Program).
There was almost a “frenzy” of sorts to get the applications filed and deposit the money into bank accounts. While many small business owners and non-profit leadership teams looked at these funds as “free money”, I cautioned my clients about qualification standards and reminded them that there would be a lot of “I”s to dot and “T”s to cross as we turn our attention to the forgiveness piece of this program.
If you are reading this, my guess is that you received funds under the PPP Loan Program and are looking for answers on how to get your loan forgiven. If not, maybe you know someone who is. Because so many businesses applied for this assistance, I wanted to share my insight with you.
Here are my TOP 10 suggestions for handling PPP funds:
Place the funds in a separate bank account immediately.
Make sure you understand the "forgiveness" parameters that you will need to adhere to in order to obtain full (or partial) forgiveness.
In your accounting records, record the funds received as a LOAN (liability) because there is NO GUARANTEE that the loan will be forgiven.
Use the funds within the allotted time frame and ONLY for specified "eligible" expenditures.
Transfer the funds penny-for-penny out of the separate account to your general fund to cover these eligible expenditures.
Keep supporting documents to back up each amount transferred.
Monitor closely the ratios of funds spent (eligible payroll costs compared to rent/mortgage interest and other specified expenses) and your number of full-time equivalent employees.
Adjust the loan balance and record the funds as "Other Income" ONLY after you receive notification from the Small Business Administration that the loan is partially or fully forgiven.
Remember you cannot “double-dip.” The expenses that were paid for with funds received from the government are NOT deductible on your tax return.
Understand that the forgiveness side of the loan may be an arduous and potentially drawn-out process. Do not assume anything.
Keep in mind, there is a chance that the forgiveness part of the loan will include payroll scrutiny on an employee-by-employee basis. This should not surprise you; after all, the purpose of the PPP loan is in its name: "paycheck protection" with a specified goal of reducing the growth of unemployment.
While I cannot guarantee that your loan will be forgiven (partially or fully), I remain committed to serving my clients as you continue to navigate through the mire of what seems like conflicting information.
My prayer for all of my clients is that you continue to run your business or organization with wisdom and integrity so that we can look back on this unprecedented time and see that you have come through this period of uncertainty mostly unscathed, more knowledgeable, and more profitable. My goal is your continued success, so you can pursue your God-given purpose with strength and boldness.
Please contact me if you have any questions whatsoever regarding this information. I look forward to assisting you.
