Here are 5 important things to keep in mind:
1) To maximize forgiveness, focus your use of the funds on the first 8 weeks. The amount of forgiveness of a PPP loan depends on the borrower’s costs over an eight-week period, beginning on the date you receive the first disbursement of funds. Costs after the 8 week period will have to be paid back per the terms of the loan.
2) Know the forgiveness analysis: The forgiveness calculation of a PPP loan requires a three-step analysis based on the following three metrics: (i) Reduction in Headcount, (ii) Reduction in Wages, and (iii) Rehires. If you have reduced employees or cut payroll, make sure you are familiar with what you need to do in order to maximize the amount forgiven.
3) Documentation: KEEP RECORDS. This may seem obvious – but it’s worth reinforcing. At some point, you will apply for loan forgiveness, and the bank will convey that request to the SBA. You will only be forgiven if the government agrees to pay the bank. As part of this process, you will have to answer for what you did with the money. The better your records, the smoother forgiveness will go.
4) Know what authorized costs are. The PPP is NOT an all purpose loan. It is intended to fund payroll – and other authorized costs. If the funds are knowingly used for unauthorized purposes, the federal government may hold the borrower legally liable such as for charges of fraud.
5) Ask questions. If you have any doubt or question as to what actions you can or cannot take, now is the time to reach out to your bank, accountant or attorney to seek guidance. You are at the beginning – and now is your opportunity to ensure a smooth path forward.
We provide legal advice and counsel to businesses of all shapes and sizes. If you have any questions, we are available at any time.
Phone: (215) 326-9179
Email: ag@garibianlaw.com