The PPP loan is one of the most common sources of funding for business owners in New York who have been affected by the COVID-19 pandemic.
Many business owners who applied for the PPP loan are now asking:
- How can I make sure that my PPP loan is forgiven?
- How can I best use the PPP loan to help my business?
- What are the new rules for PPP loan forgiveness?
- What qualifies for PPP forgiveness?
- What are the restrictions on a PPP loan?
- What is forgivable under a PPP loan?
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WHAT ARE THE PPP LOAN RULES?
The Paycheck Protection Program (PPP) is a loan designed to provide a direct incentive for small businesses to keep their workers on payroll.
Here are some of the main PPP rules to keep in mind:
- As soon as you get a loan you have 24 weeks to spend the money
- 60% of the money has to be spent on payroll costs
- 40% can be spent on other business expenses
WHAT BUSINESS EXPENSES ARE ELIGIBLE FOR THE PPP LOAN?
A borrower can apply for forgiveness once all loan proceeds for which the borrower is requesting forgiveness have been used. Borrowers can apply for forgiveness any time up to the maturity date of the loan.
To apply for forgiveness, it’s important you use the PPP loan in the right way.
Here are some of the main PPP rules to keep in mind when spending the money:
- When you compensate an employee you’re able to pay $46,154 during the 24 week period (which is basically $100,000 allocated over 24 weeks) which can be forgiven
- You can pay for employee benefits, pension related expenses and state unemployment insurance
- An owner is limited to a maximum of $20,833 for forgiveness based on a $100,000 prior year Salary. The amount is $10,417 based on a $50,000 prior year Salary
NEW PPP LOAN RULES FOR EMPLOYEE RETENTION CREDIT
Earlier in the year, congress passed a bill that allows businesses that take the PPP loan to also be eligible for the Employee Retention Credit.
Before this rule, if a business took the PPP loan they would not be eligible for the Employee Retention Credit. But now the rules have changed.
The Employee Retention Credit could be up to $10,000 per employee in 2020 and up to $28,000 per employee in 2021.
WHAT DO THESE NEW PPP RULES MEAN FOR YOUR BUSINESS?
Now that your business can qualify for the Employee Retention Credit, even if you take the PPP loan, you’ll want to make sure that when you apply for PPP loan forgiveness, not to put too much in payroll costs in order to maximize your Employee Retention Credit.
You want to make sure that you coordinate how much you spend on payroll and how much you spend on other business expenses properly so that you can qualify for the Employer Retention Credit.
That’s why for many of my clients, I’m telling them to hold off on PPP loan forgiveness right now, so we can help them get the Employee Retention Credit too.
Doing all this yourself can be difficult and mistakes could cost you a lot of money.
If you want an expert to take care of all of this for you, click here to schedule a call.