Your PPP funds were granted -- now what?



Updated 5/13/2020 2:04 PM

On March 27, President Donald Trump signed the Coronavirus Aid, Relief and Economic Security Act ("CARES Act"). The Paycheck Protection Program ("PPP") is an integral part of the CARES Act and currently provides almost $349 billion to eligible businesses. These funds are to provide financial assistance to qualifying entities in response to economic difficulties caused from the COVID-19 pandemic.

In addition, on April 24, the Trump administration struck a $484 billion deal on additional funding.


Lenders have been accepting PPP loan applications since April 3, and loan applicants are starting to receive their approvals from lenders. Unlike other traditional loans, having the loan forgiven will not count toward taxable income. Your focus should now turn to maximizing loan forgiveness.

5 key suggestions to consider

1. Create a PPP loan file:

Companies need to document every dollar spent with the proceeds of the loan and provide documentation to the lender at the end of the eight weeks. This file should contain all correspondence, evidence, receipts and support.

2. Maintaining average employee count (FTE):

PPP loans are eligible for forgiveness if your organizations average monthly FTE during the 8-week post funding period is the same or higher than one of the approved comparison period dates

3. Maintaining compensation levels:

Payroll costs during the 8-week post funding period must be 75% of the PPP loan.

4. Track qualified non-payroll costs:

The PPP loan allows for up to 25% of the loan proceeds to be spent on non-payroll costs, such as:

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• Mortgage interest

• Rent

• Utilities

• Keeping a detailed log of these payments

5. Separate Bank Account:

Consult with your bank to determine their specific requirements. Some companies may want to set up a separate checking account that receives and disburses the PPP loan proceeds.

Spending the funds

Once the loan is funded, you have eight weeks to spend the money on authorized expenses. The 8-week period begins on the date the lender makes the first disbursement of the loan. The lender must make the first disbursement of the loan no later than 10 calendar days from the date of the loan approval.

Applying for loan forgiveness

After the eight weeks, you will need to submit a request to the lender who is servicing the loan. The request will include all documents supporting the spending of the funds, number of full-time employees, and compensation levels.

We highly recommend contacting your bank as early as possible after your funding has been approved to determine the appropriate loan forgiveness documents.

• Mark Gallegos, CPA, MST is senior tax manager at Porte Brown in Elk Grove Village. Mark has dedicated his career as a certified public accountant in the area of taxation. He has more than 20 years of providing sound tax advice to his clients. Mark has extensive experience in business and individual taxation, credits and incentives, mergers and acquisitions, and international tax and consulting. He has a passion for helping clients navigate the complicated tax code and being their business advisor to help them be successful. Mark is a licensed CPA in Illinois and has a Master of Science in Taxation from DePaul University. He is also a member of the American Institute of Certified Public Accountants.