How your business should spend your Paycheck Protection Program or SBA relief money (2021 updates)

Important PPP update for 2021

On December 22, 2020, Congress passed a bill renewing funding under the CARES Act, including an additional $284 billion earmarked for America’s struggling small businesses. The rules and application process for PPP loans and forgiveness have been modified, with more businesses eligible for PPP loans, MORE TYPES OF EXPENSES FORGIVABLE, and a simplified application process. Please read the full details here.

In this 5-minute read:

  • What does the CARES act mean for businesses?
  • What is the PPP or Paycheck Protection Program?
  • Can any of these loans be forgiven (become “grants”)?
  • What should you do with your money?

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law. This act was meant to help individuals, families, and businesses find relief during this time of financial and economic stress. The PPP loan program has run out of money and been restored with new funding several times, including a new influx in late December 2020. 


The Treasury released a new IFR and an “easy” version of the PPP loan forgiveness application on June 17, 2020. Please read the full details here.

Here’s how borrowers decide which forgiveness application to use. You may use Form 3508EZ if:

  • You are self-employed and have no employees; OR
  • You did not reduce the salaries or wages of employees by more than 25%, and did not reduce the number or hours of employees; OR
  • You experienced reductions in business activity as a result of health directives related to COVID-19, and did not reduce the salaries or wages of employees by more than 25%.

If you don’t fit into any of the above conditions, you will need to complete and submit the full PPP loan forgiveness application.

On June 5, 2020, President Trump signed into law new updates to PPP loan forgiveness requirements, extending the covered period to 24 weeks, reducing the minimum loan funding that must be spent on payroll to 60%, and easing the requirements for maintaining staffing and compensation levels. Please read the details here.

In addition to the CARES Act, including EIDL grants, PPP loans, and other SBA disaster loans, small businesses can also get financial relief from private organizations that are offering emergency business capital

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The big question now is: what’s the most effective place for you to spend the money once you get it? What should you focus on first?

What does the CARES act mean for my business?

The CARES Act allows eligible small businesses to apply for Economic Injury Disaster Loans (EIDL) and get an advance of up to $10,000 in working capital. The Small Business Administration is offering assistance with applying for these loans. NOTE: THE EIDL LOAN/GRANT PROGRAM IS NOT CURRENTLY ACCEPTING APPLICATIONS. Read more here.

Another aspect of the CARES Act is the Paycheck Protection Program, which allows businesses with fewer than 500 employees to receive larger loans (up to $10M) to help maintain their employees and make payroll. This program is meant to save jobs, and even encourage your business to hire back employees that may have been laid off due to COVID-19 challenges. For 2021, the requirement to rehire or restore employees has been removed, particularly for businesses taking out PPP loans of less than $50,000. Get the full details: Can I still get a PPP loan if I’ve laid off employees?

Depending on individual circumstances and compliance with certain terms (see below), PPP loans may also be forgiven. 

IMPORTANT: To be forgiven, CARES Act PPP loans must be used primarily for payroll

While your business may use Paycheck Protection Program funding for any legitimate business expense, under the terms of loan, the funds do accrue interest (at a very low rate) and the loan must eventually be repaid UNLESS you use the money for payroll and other specific, approved purposes.

The intent of the PPP program is to save American jobs, so there’s a huge incentive for businesses to use the funds for the below, approved purposes that will allow business owners to basically think of the money as a “grant,” rather than a loan.

PPP loans can be forgiven as long as:

  • The loan proceeds are used to cover payroll costs, and most mortgage interest, rent, and utility costs over the 8 (or 24) week period after the loan is made; and
  • Employee and compensation levels are maintained. (There are now exceptions to this rule for 2021. See below for important updates.)

Payroll costs are capped at $100,000 on an annualized basis for each employee. New rules on forgiveness state that 60% of the funds (formerly 75%) must be spent on payroll costs in order to achieve full loan forgiveness. 


boss handing employee a paycheck from PPP CARES act

What should your business spend your COVID-19 relief money?

Once your application is accepted and you receive for the money from the CARES Act/SBA or from any other source of emergency funding, you have to decide what to do with it. As noted above, for PPP funding, you should definitely spend all of your funding according to the rules to achieve full forgiveness. There’s really no reason not to.

Knowing where to spend your emergency funding can be a difficult decision to make, especially in this time of not knowing what the future will look like.

The best thing you can do is remain positive and hopeful and plan for business to recover from this challenge. 

Ultimately, the priorities concerning where you should dedicate these funds is up to you, but we do have some guidance on some of the most important things businesses should put their money towards during this time. 


To keep a business running, you need to be able to actually remain functional operationally. This means “keeping the lights on” and paying for essential things like the rent for your commercial space, utilities and internet services, inventory, supplies, etc. 

Depending on the type of business you have and what it needs to continue running, this may look different for each company. Some common essentials we’ve identified are:

  • Rent/mortgage payments
  • Utilities (electric, water, garbage, phone, internet, etc.)
  • Inventory (at least enough to keep up with current demand—don’t overdo it here)
  • Office supplies or other items needed to run business operations 
  • Software and web services (Website hosting, POS system, CRMs, etc.)
  • Cleaning supplies (and/or janitorial services) assuming your physical location is in need


While we definitely see employees as an essential part of any business, this deserves its own category entirely. If you have employees, keeping them paid and feeling like they have value is just as important as keeping the lights on. (And, as noted above, for a PPP loan to be forgiven, maintaining current levels of employees and compensation must be proven.) 

For your employees, obviously the most important thing is going to be helping them keep their regular paycheck when possible. Despite not being allowed to open their businesses, several organizations are paying their employees their regular wage (as long they are able to) in order to ensure they have loyal and well-trained staff members to return to work when they are able to open their doors again. 

This can build incredible rapport between business owners and employees, and the resulting loyalty your employees may feel will likely pay off big down the line.

group of multiracial happy employees PPP funding

Depending upon your industry and individual circumstances, your business simply may not be able to maintain your pre-coronavirus levels of employees and compensation, but we hope that with whatever funding you obtain, you will be able to provide some relief to your loyal employees. 

Another thing many businesses are challenged with is the decision to cut employee benefits during this economic downturn. Is that something you’ve had to think about? Maybe this relief money can help make that decision easier by allowing you to continue to provide full benefits to your employees for a time.


Marketing is just as important as it ever was, especially if your business is able to remain open at this time. Things are continuing to close and get scary, but your marketing efforts can help provide hope for people that this won’t last forever. 

Some great platforms for marketing during the COVID-19 crisis include:

  • Facebook and Instagram ads–people who are home all day are generally on their phones scrolling through social media a lot
  • Google Ads
  • Streaming services like Hulu, YouTube, Spotify, and Pandora

Think of creative ways that your business can offer its products or services to customers during this time while adhering to the rules of social distancing. 

Use your emergency funding to help you continue to market your business and keep consumers aware that you are still open and willing to help them. Be sure to keep your messages positive and inform your customers that you are doing everything you can to ensure their health and safety. 

Planning and spending for the future

Lastly, use these relief funds to help provide for the future of your business. You might need to purchase more inventory, plan a grand re-opening for when this is all over, or start building a stronger online revenue stream and finding new ways to adapt your business to the growing challenges of a COVID-19-rattled marketspace. 

Several businesses are anticipating a permanent change as they move to online sales and services while others are just waiting for the day when they can open their doors again. What does the future of your business look like?

These relief funds can help you plan for that and soften the blow. 

PPP 2021 adds additional eligible expenses for forgiveness

There have been several updates to the original PPP terms over the past months, and the latest round of PPP funding adds more eligible forgivable expenses, so more small businesses may take advantage of this relief package.

The new bill makes the following expenses allowable and forgivable Paycheck Protection Program funds:

  • Covered operations expenditures: Payment for any software, cloud computing, and other human resources and accounting needs
  • Covered property damage costs: Costs related to property damage due to public disturbances that occurred during 2020 that are not covered by insurance
  • Covered supplier costs: Expenditures to a supplier pursuant to a contract, purchase order, or order for goods in effect prior to taking out the loan that are essential to the recipient’s operations at the time at which the expenditure was made. Supplier costs of perishable goods can be made before or during the life of the loan
  • Covered worker protection expenditures: Personal protective equipment and adaptive investments to help a loan recipient 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

For 2021, there are important exceptions to the “maintain employment and compensation rule”

If you received a PPP loan of $50,000 or less

If you received a PPP loan that was $50,000 or less, you are exempt from having to maintain your employee and compensation levels in order to receive loan forgiveness. Your loan must still be spent on approved costs and you will still need to document that you spent at least 60% of your funds on payroll expenses.

When you’re ready to apply for loan forgiveness, you will want to contact your lender to receive the simplified loan forgiveness form.

An employee quit, retired, or was fired (with just cause), or refused your offer to be rehired

If you couldn’t maintain employee levels due to someone quitting or being fired with just cause, then you can still qualify for full loan forgiveness. You can also get full loan forgiveness if you have written proof that you offered to rehire employees who refused your offer (if your offer was at their former pay). But, it’s very important that you document each of these instances so that you can verify this when you apply for loan forgiveness.

You’ll need documentation to explain why your employee was fired or other supporting documents to verify an employee’s termination or refusal to be rehired.

I got my PPP loan after December 27, 2020: do I still need to restore payroll or headcount to previous levels in order to achieve full forgiveness?

No. PPP Loans received after December 27th, 2020 are not required to “rehire” any employees in order to receive forgiveness. You will, however, need to maintain current payroll levels during the forgiveness period. (Exceptions to this would include employees who resign or are terminated with cause).

Go deeper: read about how to calculate your average monthly payroll and PPP loan request amount

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