Navigating the Payment Protection Program

Published by William T. Fricke at May 12, 2020

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Navigating the Payment Protection Program

Having your loan forgiven hinges upon you tracking your Paycheck Protection Program (PPP) loan funds properly. Documenting and applying for a PPP loan was a challenging process but applying for forgiveness can be even more difficult. At Fricke & Associates, LLC, we want to help guide you through the process. Follow the important steps below to maximize your loan forgiveness:

Important Details to Keep in Mind:

  • Use it Properly or Lose it–If you have fewer employees than the baseline period or the loan is not used to cover payroll costs and mortgage interest, rent, and utility costs over the eight week period beginning the day you receive the loan proceeds, the forgiveness amount is reduced.  If you have the same or a greater number of employees and spend the loan proceeds on payroll and covered expenses, it is possible to have your entire loan forgiven.
  • Watch your Non-Payroll Expenses—You cannot use more than 25% of your loan on non-payroll expenses.
  • Owner Compensation–If you are a shareholder of an S Corporation normally claiming a salary only in the 4th quarter, make sure to take a salary during the eight-week covered period.
  • Document, Document, Document—Accurate accounting records and supporting documentation must be supplied to your lender when you request forgiveness for your PPP loan. Electronic records and third-party reports from payroll services or CPA firms are ideal if possible.
  • Keep the Loan Separate—Intermingling the loan proceeds with your other funds may cause confusion. To be safe, consider creating a separate account which you only use to pay covered expenses.
  • Independent Contractors—Paying independent contractors does not fit within the definition of payroll expenses.
  • Look for Tracking Resources–Many national payroll providers and lenders have created PPP compliant reports which will allow you to track both payroll and benefits.

PPP Loan Forgiveness Process (As of 4/24/2020):

  1. Track Eligible Expenses—The following costs could be covered:
  2. Payroll costsThis could include compensation to employees, including salary, commissions, wages, and other forms of compensation (cash tips, leave payment, separation/dismissal allowance, employee benefits, group healthcare coverage, insurance premiums, retirement contributions, state and local taxes assessed on the compensation of employees, etc.)
  3. Mortgage interest on real or personal property prior to 2/15/2020
  4. Rent based on a leasing agreement established prior to 2/15/2020
  5. Utilities—Payments for electricity, gas, water, transportation, telephone, or internet access are considered covered if the service was secured prior to 2/15/2020 
  6. Any EIDL to be refinanced—Refinance decisions are left at the discretion of the borrower.
  7. Determine Payroll Costs and Possible Forgiveness–75% of the funding must be used on payroll. If less than 75% is used on payroll, the forgiveness is reduced by the amount under 75%. 
  8. Document any Percentage Decreases in FTEs—For example, if your company had a 15% drop in FTEs in the 8-week covered period, your loan forgiveness will be reduced by 15%.
  9. Determine if You Have Any Payroll Reductions—If you have payroll reductions which are more than 25% of your previous quarter, you must document it and reduce your forgiveness by 25%.
  10. Calculate Adjustments based upon Restoration—If you restore FTEs and salary/wages prior to June 30th, you can forego step 3 and 4.

Future guidance regarding the PPP from the SBA may change the information above. We will keep you updated as we learn of relevant changes. Please contact us at or call 770-216-2226 if you need assistance concerning accounting for and documentation of covered costs related to forgiveness of your PPP loan.

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