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As a business owner, you and your employees have been diligently working to maximize the loan available under the Paycheck Protection Program (PPP), but after a company has been approved by the Small Business Administration (SBA), the work doesn’t stop. The lender has 10 calendars days to make the first disbursement, which starts the company’s 8-week covered period. From that point onward, your 8 weeks to maximize loan forgiveness is running out.
Up to the full amount of both principal and interest can be forgiven if PPP loan proceeds are used on allowable uses and you maintain your workforce and their salaries. As an added benefit, the partial or full loan forgiveness will not be recognized as taxable income for federal purposes.
So how should companies facilitate the tracking of the related expenses to safeguard the forgiveness of PPP loans?
Once the loan has been distributed, companies need to ensure that use of every dollar of the funds is tracked so that you can provide the proper documentation to the lender when applying for loan forgiveness. Be proactive and discuss with your lender what documentation they will require to support the forgiveness. The CARES Act includes some of the documentation required, but your lender may require additional information. Understanding the documentation requirements of both the CARES Act and your PPP loan lender will enable you to properly track allowable uses and locate supporting documentation.
A couple of best practices include:
Please visit our Coronavirus resource page at schneiderdowns.com/our-thoughts-on/category/Coronavirus for related content.
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