What are the Approved Uses for the PPP Loan Funds?
To make sure you don’t misuse the funds from your Paycheck Protection Program (PPP) loan, here is a list of core spending options for your business.
Updated Jan 21, 2021: With a new round of PPP loans, comes new guidance and regulations. Although a lot of the application is the same there have been some updates on approved PPP Loan expenses.
Here are a few highlights that you should be aware of:
- To be eligible for a PPP Loan, a business must have been in operation on February 15, 2020.
- 500 or fewer employees (300 for a second draw).
- The 2021 round of PPP will be open until March 31, 2021, or until program funds are exhausted, whichever happens first.
- The SBA has streamlined the forgiveness application for businesses that receive PPP loans of $150,000 or less. It is a one page application and a few certifications the borrower needs to provide. The SBA has updated the 150K or less application. You can access it here.
- The clock starts when the money hits your account.
- New policy shifts or clarifying pieces may be released at any time; readers may wish to view these updates at www.sba.gov.
Qualifying Expenses (Updated: Jan 2021)
- Compensation (salary, wage, commission, or similar compensation, up to $100,000)
- Payment of cash tips or equivalent
- Payment for vacation, parental, family, medical, or sick leave
- Allowance for dismissal or separation
- Payment required for the provisions of group health care benefits, or group life, disability vision, or dental insurance including insurance premiums
- Payment of any retirement benefit
- Payment of State or local tax assessed on the compensation of employees
- Rent: So long as your lease agreement was signed before Feb. 15, 2020, rent expense can be forgiven.
- Utilities: Again, so long as the service began before Feb. 15, 2020.
- Mortgage Interest: As long as the mortgage was signed before Feb. 15, 2020, mortgage interest can be forgiven. Again, this is mortgage interest only, not principal.
- Interest: Interest on any other debt obligations that were incurred before February 15, 2020.
- Healthcare Expenses: Costs related to the continuation of group health care benefits during periods of sick, medical, or family leave, and insurance premiums.
- Auto Loan Interest: If the automobile is used for direct work related activities such as deliveries
- SBA EIDL: Refinancing an SBA EIDL loan made between Jan. 31, 2020 and April 3, 2020.
- Covered expenditures such as business software or cloud computing services that facilitate:
- Business operations
- Product or service delivery
- The processing, payment or tracking or payroll expenses, human resources, sales, and billing functions
- Accounting or tracking of supplies, inventory, records, or expenses
- Covered Property Damage Costs
- Covered Supplier Costs
- Covered Worker Protection Expenditures
Note: Sole Proprietor requirements for these last 4 expenses must be deducted on the individual’s tax forms, or else they do not qualify.
What are prohibited uses of loan proceeds?
- Lobbying Activities
- Lobbying expenditures related to a state or local election
- Expenditures designed to influence the enactment of legislation, appropriations, regulation, administrative action, or executive order proposed or pending before Congress or any State government, State legislature, or local legislature or legislative body.
- Expenditures unrelated to the business.
More PPP Resources:
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