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Your Guide To PPP Forgiveness Rules, Qualified Expenses, & How To Apply For PPP Loan Forgiveness

  • 17 comments
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Erica Seppala

Erica Seppala

Erica is a writer based in Greenville, South Carolina. She is a graduate of Limestone College. Initially determined to be an accountant, she put away the calculator and picked up a laptop to pursue her dream of being a writer. Erica has spent the past 10 years writing blogs and articles for hundreds of private clients, and she loves sharing her love of research and the written word with everyone around her.
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17 Comments

Responses are not provided or commissioned by the vendor or bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the vendor or bank advertiser. It is not the vendor or bank advertiser's responsibility to ensure all posts and/or questions are answered.

    Lloyd

    Regarding PPP expense forgiveness (under the 25% non-payroll portion of our loan), what qualifies as legitimate “transportation” expenses? Gas for our vehicle fleet? Mileage reimbursements for employees using their own vehicles (reimbursed at the federal mileage rate)? Maintenance of vehicle fleet, etc?
    thanks!

      Jessica Dinsmore

      Hi Lloyd,

      This is a great question. The SBA hasn’t defined what’s covered under transportation to our knowledge. However, in its April 20th interim final rule, the SBA does mention that “gas you use driving your business vehicle” does fall under “business utility payments” that are eligible for PPP loan use. Based on that, our interpretation is that gas for business vehicles would for sure be covered. However, we aren’t so sure about general maintenance costs because the SBA seems otherwise unclear about transportation/utilities.

        Madelyn White

        Dear Jessica,
        My payroll for 2019 contained 2 full time and 2 part time workers. This is the gross payroll amount I used for the PPP loan application. Now all of a sudden I am reading it is ‘full time employees’. Will I be penalized or have a reduction in my forgiveness as I am spending the same amount in payroll as I have not reduced the employees or their hours in the loan forgiveness time frame,( nor do I intend to)?

        Please help as I cannot find any mention of part time workers. Payroll liabilities are paid on a weekly basis, quarterly payroll is done my accountant with all the proper forms. I appreciate your answer.

        Regards,
        Madelyn

          Jessica Dinsmore

          Hi Madelyn,

          You will have to calculate the average number of hours of your employees (full and part-time) and you’ll use this calculation to determine if you have full loan forgiveness. The PPP Forgiveness application states:

          “This calculates the average full-time equivalency (FTE) during the Covered Period or the Alternative Payroll Covered Period. For each employee, enter the average number of hours paid per week, divide by 40, and round the total to the nearest tenth. The maximum for each employee is capped at 1.0. A simplified method that assigns a 1.0 for employees who work 40 hours or more per week and 0.5 for employees who work fewer hours may be used at the election of the Borrower. This calculation will be used to determine whether the Borrower’s loan forgiveness amount must be reduced due to a statutory requirement concerning reductions in full-time equivalent employees. “

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            Dave Jay

            Thank you for your informative article.

            I am a self employed sole proprietor, and was approved.

            Am I able to use 100% of the loan to pay myself?

            If so, may I do so by transferring each payment amount (I am typically paid monthly, so I would break the loan in two during the 8 weeks), from my business checking account into my personal checking account, and printing the receipt as proof? Can I do this and still have the loan forgiven?

            Also, I work from home, so not sure how much of my rent and utilities to apply to loan. Therefore, would it be safer for me to just pay myself 100% of the loan as income?

            Hope my questions are clear.

            Thank you for your time and consideration.

              Jessica Dinsmore

              Hi Dave,

              You can potentially use 100% of the loan on payroll if you want (75% is the minimum). Assuming that you applied for the loan based on just having one employee (yourself), what you’re describing could be fine, but it depends how much you were approved for. You can’t pay yourself more than $100K or give yourself a big raise. And certainly, a percentage of the loan could be spent on home office costs as well. This post on PPP for Self-Employed might be helpful to you.

                jessica

                Hi, if I got my PPP founds on May 4th and My payroll is from 1-15 and 16-end of the month, can I start the 8 weeks of payroll en May 16 to July 15?

                  Jessica Dinsmore

                  Funds should be used for payroll for the eight-week period starting from the date that funds were disbursed. In this case, that would be May 4th, and it looks like the eight-week period would run through June 29. Any payroll that’s run between those two dates can be forgiven, even if it hasn’t been paid yet. (i.e., in this case, payroll run from June 15 to 29 could be forgiven, even if it’s not actually paid to employees until July.)

                    Amelia Berger

                    What about GL and WC? Could these be considered “Utilities”?

                      Jessica Dinsmore

                      Hi Amelia,

                      The application defines utilities as “Electricity, gas, water, transportation, telephone or internet access, for which service began before February 15, 2020.”

                        Janice Reid

                        Can someone clarify this for me? If two of the five employees got a 50% pay cut due to not meeting sales goals, are we completely disqualified from loan forgiveness or just subject to a partial reduction? Also, if we hired someone February 2, 2020, but terminated them May 4th, 2020, for performance issues and want to wait to rehire, are we completely disqualified from receiving any loan forgiveness?

                          Jessica Dinsmore

                          Hi Janice,

                          You must maintain the average number of employees and wages that you listed on your application in order to qualify for full forgiveness. If you don’t maintain these averages, some of the principal will be forgiven but a portion (based on the number of employees that were let go and how payroll costs were reduced) will have to be repaid. While it’s certainly fine that you cut employees, you would need to rehire and maintain your numbers through the 8-week duration of the loan to qualify for full forgiveness.

                            Amie Diaby

                            Hi, I am self employed business owner I have a hair salon. I have people that work with me. I got approved for the ppp loan I have 6 employees I pay them in commission and In cash, what are some things I can do for me to be eligible for the payment forgiveness Plan and also can I pay myself with the ppp loan?

                              Jessica Dinsmore

                              Hi Amie,

                              I think you’ll find the answers to all those questions and more within this post! Check it out and let us know if you have any additional questions. Congrats on your PPP loan approval!

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                                rick vanduzer

                                Question if you only bring back 50% of your payroll in the 8 week period after your loan is funded you will lose 50% of your payroll funding. Would you also lose 50% of your non-payroll funding?? or would you be able to spent the entire 25% of non-payroll funding?

                                  Jessica Dinsmore

                                  Hi Rick,

                                  The good news is you won’t lose any of that money! The not so good news is that if it doesn’t go to payroll then you lose the option for that amount to be forgiven.

                                    La Vie

                                    Hey! this is a very interesting article, these are the important rule for qualifying loans.

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