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SBA loans: We can help you get an emergency loan for COVID-19

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SBA loans: We can help you get an emergency loan for COVID-19

Click to learn more

What expenses are forgivable for a PPP loan?

May 01, 2020

In this 2-minute read:

  • PPP loan expenses that can be forgiven
  • What can cause loan forgiveness to be reduced?
  • How do I apply for PPP loan forgiveness

As you are receiving your loan from the Paycheck Protection Program or preparing to do so, it’s a good idea to be familiar with what expenses you can and should use your PPP loan for in order to receive any amount of forgiveness on your loan.

IMPORTANT NOTE: On Wednesday, May 13, 2020, the SBA released revisions to their FAQs regarding PPP loan forgiveness. Read the details here

Womply is acting as a facilitator to connect American small businesses to SBA-authorized lenders to get emergency loans for COVID-19 relief. Start your free application here, or call us at 855-208-8813 for a free consultation.

What expenses are authorized under a Paycheck Protection Program loan? Can all business expenses be forgiven?

Since the intent of the Paycheck Protection Program is to stimulate the American economy and save American jobs and businesses, there’s a huge upside to PPP loans: It is possible to have your full PPP loan completely forgiven. In other words, if you follow the rules and document your expenses properly, you won’t have to pay it back. Ever.

But you do have to apply for PPP loan forgiveness, and there are specific items that you need to use these funds on in order to receive that forgiveness. 

The first thing to know is that you must use at least 75% of your loan funds towards maintaining payroll expenses in order to receive forgiveness of your loan. 

Approved payroll expenses accepted for PPP loan forgiveness include:

  • Wages, including tips and commissions
  • Paid time off for vacation or sick leave
  • FMLA
  • Severance payments
  • Group healthcare benefits
  • Retirement benefits
  • State or local tax
  • Certain sole proprietor and independent contractor compensation

You may also use the other 25% of your PPP loan to cover approved, legitimate business expenses such as commercial rent, mortgage payments, and utilities and receive loan forgiveness as long as the other 75% is used toward the above-mentioned payroll costs. 

If you need to use your PPP funding for other business expenses, you can. But just be aware that they may not qualify as forgivable expenses and you’ll have to pay back that portion of your loan under the terms of the PPP agreement.

What can cause a reduction in my PPP loan forgiveness amount?

If you use your PPP loan for anything other than the costs mentioned above, you won’t receive full loan forgiveness. But since it’s a 1% loan and you have 2 years to pay back any unforgivable expenses and interest, that may be worth it to many businesses. You can still apply for forgiveness of any portion of your loan that you spent on authorized PPP forgiveness expenses.

Other things that can cause your PPP loan forgiveness to be reduced include:

  • Not maintaining your employee headcount (letting employees go after February 15, 2020)
  • Not maintaining employee salary and wage levels (these can’t fall more than 25%)

If you have lowered employee wages or laid off any employees between February 15, 2020 and April 26, 2020, you can still correct this in order to receive your loan forgiveness. You just need to restore employee headcounts and wage levels by June 30, 2020. 

More helpful resources for PPP loan forgiveness:

Still need to apply for the Paycheck Protection Program loan?

If you haven’t applied for the PPP loan, you still can. However we recommend doing so soon because of the high demand for this loan. It’s likely the second round of funding will quickly run out and, though we expect there will likely be a third round, nothing is certain.

Womply is a verified loan facilitator working with small businesses and lenders to help them navigate the PPP loan application process. We’ll help you apply for free and pair you up with an eligible SBA lender who is still accepting PPP loan applications. 

Get a free consultation by calling us at 855-208-8813 or click here to start your free application. 

Over 450k small businesses use Womply software. Now we’re helping you get the emergency PPP funding you need, ASAP.

By clicking “Start My Application”, I understand and agree that this program is subject to the PPP Loan Program Terms and the Service Agreement.

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