If you were able to secure a Paycheck Protection Program (PPP) loan for your business, it is important to have a plan for meeting the requirements for forgiveness on the loan. Any portion of a PPP loan that isn’t forgiven must be repaid after a six-month deferral period over two years, at an interest rate of 1%. Here are some best practices Partner Kevin Papa suggests.
- Hire back employees and restore headcount and wages to prior levels.
- Segregate the PPP funds from other business funds, ideally in a separate bank account.
- Maintain a paper folder or electronic folder for all PPP expenses and cancelled checks. You have 8 weeks from funding to track these costs (not 2 months, but 8 weeks).
- Keep a record of the exact amount of health benefits and pension contributions due for the 8 weeks and fund them before the end of the 8 weeks.
- Pay rent(s) on-time. Find your lease agreement and have it ready to produce.
- Pay utility bills on-time and save the bills.
- Loans – Pay the interest on your loans when due. Of course, pay the principal also if required, but keep track of the interest either with statements or an amortization schedule.
The idea is to be ready to produce your records when you apply for forgiveness. Your diligent efforts will prepare you for scrutiny and will support the loan forgiveness criteria the lender will be reviewing.
For more information, please contact us at 401-831-0200.