(Updated: 4/24/20) On Thursday, April 23rd, the House approved $484 billion package to help small businesses. This includes $310 billion for additional Paycheck Protection loans. The SBA has yet to re-open the application process. We will continue to update this post as we learn more.

 The Xendoo team is here to help with getting your books caught up, preparing and filing your taxes, or just to talk about the relief efforts available. Click here to book a no-cost, no-commitment consultation.

Before we get started, here are the resources we’ve published about the Paycheck Protection Program:

We’ve heard from many business owners who are looking for guidance on how to ensure their PPP loan is 100% forgiven. We’re sharing our guidance based on what we know from the U.S. Treasury.

Approved expenses (payroll, mortgage interest, rent, utilities) are eligible for forgiveness, however, the following conditions apply:

  1. 75% of your loan must be used for payroll costs. This means at least 75% of the funds provided must be used for payroll. This does not include payments made to independent contractors.
  2. You must maintain the total number of employees on your payroll. 
  3. Your funding must be used over eight weeks of coverage. Eligible expenses are those that take place over eight weeks starting from the day the first payment was made by your lender (may or may not be the date you signed your loan agreement.) An easy example to reference: if your loan gets deposited in your bank account on May 1st, you can only use the funds on expenses incurred during the 8 weeks following May 1st.
  4. You must maintain at least 75% of the total salary paid to your employees. This is going to be individually assessed for each employee (only employees that did not receive more than $100,000 in annualized pay in 2019.) This means that employees pay over the 8 week period must be at least 75% of their total pay received during the most recent quarter in which they were employed. If their pay is less than 75% of the pay they received previously (in the most recent quarter), the eligible amount for forgiveness will be reduced.
  5. Rehiring: you can rehire any staff that was laid off or furloughed and reinstate pay that was decreased by more than 25% to meet the requirements for forgiveness. Businesses will have until January 30th to do so.


How do self-employed individuals prove their PPP funds were used as intended?

Those that are self-employed are entitled to use their PPP loan to replace lost compensation due to the impacts of COVID-19. However, the full amount is not to be used entirely to replay pay. Eight weeks worth of your 2019 net profit will be eligible for forgiveness.

Self-employed individuals that have mortgage interest, rent or utilities expenses must have claimed or be entitled to claim a deduction for those expenses on your 2019 Schedule C in order to claim them for forgiveness.

How do you apply for PPP loan forgiveness?

Each individual lender will be processing forgiveness applications. Your lender is going to be your go-to for instructions on how to apply for forgiveness and when to apply for forgiveness. Your lender will be required by law to provide you with a response within 60 days.

What do you need to apply for PPP loan forgiveness?

Each individual lender may have specific requirements on what is needed to apply for forgiveness. However, the following documents are required to provide alongside your PPP forgiveness application.

  • Documentation verifying the number of full-time equivalent employees on payroll, including their pay rates, for the periods used to verify you met the staffing and pay requirements.
    • This includes:
      • Payroll reports (from your payroll provider)
      • Payroll tax filings (Form 941)
      • Income, payroll, and unemployment insurance filings from your state
      • Documents verifying retirement and health insurance contributions
  • Documentation verifying your eligible interest, rent, and utility payments (canceled checks, payment receipts, account statements)

For sole proprietors who do not have payroll through a payroll provider, you are able to have eight weeks of the loan forgiven as a replacement for lost profit, however, you will need to provide documentation. Documentation must be for the remaining two weeks worth of cash flow, proving you spent it on mortgage interest, rent, lease, and utility payments.

How much of my loan will be forgiven?

The U.S. Treasury outlines loan forgiveness as follows: You will owe money when your loan is due if you use the loan amount for anything other than payroll costs, mortgage interest, rent, and utilities payments over the 8 weeks after getting the loan. Due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs. You will also owe money if you do not maintain your staff and payroll.

  • Number of staff: Your loan forgiveness will be reduced if you decrease your full-time employee headcount.
  • Level of payroll: Your loan forgiveness will also be reduced if you decrease salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019.
  • Re-hiring: You have until June 30, 2020 to restore your full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020.

This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.