5 Tips to Ensure Your PPP Loan is Forgiven

A Picture of teh first page of the PPP loan forgiveness application

It can be argued that there was never a better, more well-intentioned public assistance program for small businesses than the CARES Act. The CARES Act included an incredibly popular feature called the Paycheck Protection Program (PPP) loan. The best part about PPP loans is, if you use the funds according to the rules, the principle and interest amounts would be completely forgiven. Unfortunately, actually getting that foregiveness is easier said than done. For many PPP borrowers who received their money in early April, their 8-week covered period is coming to an end.  But, is this really the end of the road for them?  Not necessarily. In this post we will highlight the 5 tips to ensure your PPP loan is forgiven.

Exercise Modeling in Deciding Covered Period

You can’t just “Pick One”. Ask yourself, what’s best for your business situation? Will you use the original 8-week covered period, or Alternative Payroll Covered Period? What about the using the 24-week covered period?  Borrowers faced with this decision need to determine how much money they have left remaining and how many weeks they have left in each covered period. Take the time to model out the differences before you make this critical decision.

Select the Most Favorable Reference Periods

Every borrower needs to understand the specific reference periods that can and must be used when running their PPP loan program for their organization.  Each must evaluate whether to use the February 15, 2019 through June 30, 2019; or, January 1, 2020 through February 29, 2020 for their average Full Time Employee (FTE) calculation.  Going with the lower FTE count of the two will give you a leg up.

Ensure you Differentiate the Salary/Wage Requirements Correctly

While 60% of the overall use of the PPP funds needs to be on payroll costs, the borrower must not reduce any specific employee that was on payroll during the period of January 1, 2020 and March 31, 2020 by more than 25%.  Borrowers who do not stay on top of their salary/wage requirements will be caught flat-footed when applying for forgiveness. And they might be required to pay back a significant portion of the loan that could have been forgiven.

Maximize Reduction Rules and Safe Harbors

Many borrowers do not appreciate the amount of employee communication and coordination required to strategically achieve the reduction rules and safe harbors.  The interplay of state unemployment, federal pandemic unemployment assistance, PPP, and state covid-19 phased re-openings is complex. And there are a number of legal pitfalls surrounding labor regulations and OSHA.

Document, Document, Document

Lenders and the SBA will require considerable paperwork,  including the PPP Loan Forgiveness Application, and supporting documentation to be submitted with their package.  You will also need to submit banking statements, payroll journals, employee communications, and statutory forms. Organization and record-keeping will be key to loan forgiveness success. It is a bad idea to wait until the last minute to try and pull everything together. The PuzzleHR PPP Loan Monitoring Service is a great option for business leaders who don’t have the time to keep track of every payroll dollar spent on a weekly basis but want to make certain they maximize their loan forgiveness.

If you’re concerned about being able to have your loan forgiven, or don’t have the bandwidth to follow these 5 tips to ensure your PPP loan is forgiven, contact the experts at PuzzleHR and get help today.



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