Businesses that have managed to secure financing through the Paycheck Protection Program (PPP) are fortunate—but also saddled with a lot of red tape. Business owners and managers should be careful that they adhere strictly to the terms of the program in order to qualify for loan forgiveness.
In response to the coronavirus pandemic, Congress created the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The historic $2.2 trillion stimulus bills included $350 billion towards the PPP; a forgivable loan program targeted to aid small businesses dealing with losses resulting from the coronavirus pandemic. Unfortunately, the Small Business Administration (SBA) loan program, which was rapidly flooded with applications, quickly maxed out the money available for emergency loans. Congress is expected to authorize more funds for the program in the near future.
While business owners who did manage to secure a PPP loan are fortunate, they have a lot of work ahead of them. In order to qualify for loan forgiveness, the PPP funds must be used for certain allowable purposes, including:
Money used for any of the allowable purposes listed above will qualify for 100% forgiveness; loan money used for non-allowable purposes must be repaid. This means that businesses who take on PPP loans must shoulder a big burden of new reporting requirements. Failure to keep thorough records of how the loan money is used could result in loss of forgiveness for some portions of the loan money. For detailed information specific to loan forgiveness, click here.