One of the most appealing parts of PPP loans is the potential to have the entirety of the loan forgiven. The amount of forgiveness provided by the SBA depends largely on employee-related matters during the term of the PPP loan.
Chiefly, the program offers forgiveness for businesses with employees so long as they re-hired (or did not lay off) staff, only reduced salaries by 25 percent for employees making less than a $100,000 annualized salary, and used 60 percent of the total funds towards paying employees and staff. Some exceptions, allowing for full loan forgiveness, apply if laid off staff did not want to return to work or were otherwise non-responsive to offers to rejoin the company.
There are also other conditions within PPP loan forgiveness requirements that deal with how funds can go towards other purposes. So long as you used no more than 40 percent of your loan to pay for mortgage interest, rent payments, or utilities, you are likely to have the total amount of these expenses forgiven as well.
Eligible Expenses
The following list includes all eligible expenses for PPP loans:
- Payroll costs
- At least 60% of your loan funds must go to payroll costs
- Please see our Payroll Cost support article to review eligible payroll costs
- Utilities
- Costs related to the continuation of group health care, life, disability, vision, or dental benefits
- Payments of interest on any mortgage obligation
- Excludes any prepayment of or payment of principal on a mortgage obligation
- Rent
- Includes rent under a lease agreement
- Interest on any other debt obligations that were incurred before February 15th, 2020
- Refinancing an Economic Injury Disaster Loan you received between January 31th, 2020 to April 3rd, 2020
- Covered operations costs*
- Payments for business software, cloud computing, payroll payment or tracking, HR, sales and billing functions, accounting or tacking of supplies, inventory records and expenses
- Covered property damage costs*
- Property damage due to public disturbances that occurred during 2020 and which is not covered by insurance
- Covered supplier costs*
- Must be essential to operations at the time the PPP loan was taken
- Must be made via a contract, purchase order, or order for goods in effect prior to the loan
- Supplier costs of perishable goods can be made before or during the life of the loan
- Covered worker protections*
- PPE and adaptive investments to help comply with federal health and safety guidelines or any equivalent State and local guidance related to COVID-19 during the period between March 1, 2020, and the end of the national emergency declaration
- Examples include drive-through window, ventilation system, sneeze guards, expansion of business space, health screening capabilities, or others
- Does not include residential property/intangible property
- PPE and adaptive investments to help comply with federal health and safety guidelines or any equivalent State and local guidance related to COVID-19 during the period between March 1, 2020, and the end of the national emergency declaration
*These are new eligible expenses added as a result of the latest stimulus package. Please note that these expenses apply to all PPP loans.
You may be required to prove that your loan funds went towards eligible expenses once it’s time to apply for forgiveness. More information regarding this process will be provided when the SBA releases the new forgiveness form.
The information, opinions, and advice in this blog post are provided for educational purposes only, and do not necessarily state or reflect those of BlueVine and/or its partners, including The Bancorp Bank and Celtic Bank. Neither BlueVine nor its partners are responsible for the accuracy of any content provided by author(s) or contributor(s). For information about BlueVine products and services, please visit the BlueVine FAQ page. For information about the Paycheck Protection Program, please visit the SBA’s page.