Updated: Jul 7
Congratulations you’ve been funded! Now what?
You want to get most if not all of your loan forgiven so what do you do now?First and foremost have a plan to track the funds in your accounting to PPP. This may sound confusing but it’s actually fairly simple and the purpose is to make sure that if you receive multiple forms of funding that it does not cover the same expenses. In QuickBooks you can use class codes, in other software, there may be a similar equivalent but in either case, you can just add payroll journal, checks or receipts to a separate folder deemed “PPP Expenses”
One thing you will also want to do is pay attention to your FTE (Full-time employee) number. The maximum amount of forgiveness will be based on this number. What does that mean? Well, say you had 70 employees during either “test” period (Feb 15, 2019, to June 30, 2019, or Jan 1, 2020 to Feb 29, 2020) and then during the 8 weeks after funding you had 65 average employees. That means that your maximum forgivable amount is 92.86% of the loan. Plus remember 75% of the funds need to be used for payroll and 25% can be used for rent, utilities, or interest.
You will also want to make sure that you have not decreased wages for the position by more than 75%. You have to pay people at least 75% of what they were getting paid prior to COVID-19
Talk to your bank, just like each lender had its own application process… each bank will have its own forgiveness process as well. You will want to make sure you are communicating with your banker throughout the 8 weeks to make sure you have the right documentation to go back to them after 6/30/2020 with the right documents. This time has definitely brought many things to light and some of it has completely knocked us over. Securing funding via the PPP is great but as always, you want to make sure you are utilizing those funds appropriately and make wise decisions. You do not need to stress or panic in regards to spending funds, it does not need to be a stressful process. Just be sure your funds/loans, etc. are not overlapping expenses. There has been a special committee appointed to monitor the use and disbursement of these funds (Special Inspector General for Pandemic Recovery). This may mean that you could undergo an audit, however, if you keep good accounting records and pay your employees about the same as before, you shouldn’t have any issues. Remember that even if you don’t exhaust the funds during the period any repayable amount is incurring a 1% interest rate with a maturity date of 24 months from loan origination. Hopefully, things return to some type of sustainable “normal” where we can at least not worry so much about cash flow, but in the meantime, it’s good to know there are resources out there. Long story short, keep your books in order and you shouldn’t have any issues!