Brian Eagan CPA Using funds from the Paycheck Protection Program (PPP)
If you were one of the businesses that successfully secured funds from the Paycheck Protection Program (PPP), it is now imperative you utilize those funds appropriately—in terms of timing and usage—in order to qualify for the eligible loan forgiveness. Additionally, you will need to keep the appropriate documentation of expenses to apply for the loan forgiveness, not to mention in the case of an audit. Here we review the type of expenses that should be utilized with the PPP funds in order to secure the loan forgiveness as well as what to consider in terms of documentation.
Timing of Expenses
First and foremost, forgiveness will be granted for the portion of the funds you utilize on expenses incurred during an eight-week period from the time the loan funds are received. Many businesses received those funds last week, so if funds were received on Friday, April 17, 2020, you should be tracking eligible expenses between April 17 and June 12, 2020.
Use of Funds
Depending on how much your business qualified for in terms of PPP funds you will want to make a concerted effort to utilize all or most of those funds for expenses that qualify for the loan forgiveness under the program.
For this eight-week period, you likely have three to four payrolls that would qualify for appropriate use of the PPP funds eligible for forgiveness, so this is a good place to start. In addition to salaries, wages, and commissions, eligible payroll costs for forgiveness purposes can include retirement benefits, severance, vacation time, as well as parental, family, medical, or sick leave expenses. It is important to note this cannot exceed more than $100,000 per employee during this eight-week period. Additional payroll-related expenses include group health insurance, retirement benefit costs, and state and local payroll taxes.
Beyond payroll expenses, PPP funds that qualify for forgiveness also include payment of interest on mortgage loan(s), rent with an existing lease agreement, utility expenses, and interest on other debt obligations incurred prior to receiving the loan.
Necessary Documentation
In order to receive the loan forgiveness, you will have to apply through the lender that secured the PPP funds for your business. The application for forgiveness will need to include documentation verifying the number of employees on the payroll, their pay rates, and payroll tax-filing information.
You will also need to include verification of payments made on your lease or rent obligations, as well as your utility expenses. Finally, there will need to be a certification from the business and likely the lender that all documentation provided is legitimate and truthful and that the funds were used in accordance with the PPP guidelines for forgiveness.
Here you will find PPP Forgiveness Planning Worksheet to estimate your loan forgiveness, to track expenses incurred, and a checklist of the information you will need to provide to present to the bank for loan forgiveness. This is a good template to start with to keep track of these expenses and the appropriate documentation to submit for loan forgiveness following the 8-week period. Your lender may have specific forms for you to complete but by using these worksheets to track your expenses as they are incurred you will be collecting the information you should need for any lender provided forms.
About the Author:
Brian Eagan leads the firm’s Accounting Solutions group and has been responsible for leading this department since 2008. Under his leadership, the department has grown significantly thanks in large part to the group’s ability to identify, develop, and retain top-level talent. Currently, in addition to leading this group, Brian specializes in providing high-level interim CFO and Controller work for small to medium-size businesses, including non-profit and local government agencies. In this role, Brian makes himself highly accessible to clients by phone and e-mail, in addition to appreciating the importance of performing some of these services onsite at clients’ offices. As part of new client integration, Brian will evaluate the services and client needs, and together with management develop a streamlined communication process and a regular site visit plan.
Brian received his B.S. in accounting from DePaul University in 2001. Upon graduation, he began his career as an accounting assistant with an insurance firm in Chicago. Within three years, Brian had been promoted to controller. In 2004, Brian began to seek new challenges, which led to him join the Selden Fox team in the audit department. After four years in the audit department, Brian transitioned into the firm’s Accounting Solutions group. His background in auditing and experience as a controller provides him with an excellent skill set to assist clients from an accounting and business perspective.
Brian is a licensed CPA and a member of the American Institute of Certified Public Accountants and the Illinois CPA Society. He is a member of the board of directors of the West Suburban Chamber of Commerce and Industry.
