What Can I Use the PPP Loan For?

The PPP loan can be used for payroll costs, rent, utilities, mortgage interest, or any other debts or obligations that were incurred before February 15, 2020.

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PPP Loan Basics

The PPP loan is a loan that is available to small businesses and self-employed individuals in order to help them keep their businesses afloat during the COVID-19 pandemic. The loan can be used for a wide variety of expenses, including payroll, rent, utilities, and more. In this article, we will take a closer look at what the PPP loan is and how it can be used.

What is the PPP Loan?

The PPP loan is a loan that is offered to small businesses and self-employed individuals in order to help them cover the costs of their business during the COVID-19 pandemic. The loan is offered by the US government through the Small Business Administration (SBA).

The PPP loan is a loan that can be used for a variety of purposes, including payroll, rent, mortgage interest, utilities, and other allowed expenses. The loan can be used for both new and existing businesses.

The PPP loan has a maximum amount of $10 million. The interest rate on the loan is 1%, and the repayment period is two years. There is also a six-month grace period for repayment.

How do I apply for the PPP Loan?

You can apply for the PPP Loan through any SBA-approved 7(a) lender or through any participating federally insured depository institution, federally insured credit union, and Farm Credit System institution. You should consult with your local lender as to whether they are participating.

You can also apply through the SBA by completing the application and submitting it to your lender.

How much can I borrow?

The CARES Act limits the amount you can borrow through the PPP to 2.5 times your average monthly payroll expense for the 2019 calendar year or the 12 months prior to when you received your loan (whichever is less). However, note that this calculation excludes certain payroll expenses, such as state and local taxes, health insurance premiums, and retirement contributions.

PPP Loan Uses

The Paycheck Protection Program (PPP) loan is a government-backed loan that can be used for a variety of small business expenses. These expenses include payroll costs, mortgage interest, rent, utilities, and working capital. The PPP loan is a lifeline for many small businesses during the COVID-19 pandemic.

Can I use the PPP Loan for payroll?

Yes, you can use the PPP loan for payroll. Payroll includes:
-salaries
-wages
-commissions
-tips
-employee benefits (health insurance, retirement contributions)
-payments for state and local taxes assessed on employee compensation

Can I use the PPP Loan for other expenses?

The PPP Loan can be used for a variety of expenses, including:
-Payroll costs
-Rent or mortgage payments
-Utilities
-Interest on debt obligations incurred before February 15, 2020

What are the restrictions on the use of the PPP Loan?

The PPP Loan is intended to provide small businesses with the resources they need to keep their employees on the payroll and cover other essential operating expenses during the COVID-19 pandemic.

However, there are some restrictions on how the loan can be used. According to the Small Business Administration (SBA), PPP loan proceeds must be used for:

-Payroll costs, including benefits
-Interest on mortgage obligations incurred before February 15, 2020
-Rent under a lease agreement in force before February 15, 2020
-Utilities for which service began before February 15, 2020

Loan proceeds may not be used for:
-To refinance an existing SBA loan or any other non-payroll loan
-To pay any salary or compensation of an individual employee that exceeds $100,000 annually

PPP Loan Forgiveness

What expenses are eligible for forgiveness?

The SBA’s PPP loan forgiveness application states that eligible expenses include payroll costs, mortgage interest, rent, and utility payments.

To be eligible for forgiveness, these expenses must have been made during the covered period, which begins on the date of your loan and ends either 24 weeks after that date or December 31, 2020, whichever comes first.

Additionally, at least 60% of the forgiven amount must have been used for payroll.

What is the process for applying for forgiveness?

To apply for forgiveness of your PPP loan, you (the Borrower) must complete and submit to your Lender a Request for Forgiveness Application, which includes the following:

Completion of the Loan Forgiveness Calculation Form located in the PPP Forgiveness Application Instructions;
Documentation verifying the number of full-time equivalent (FTE) employees on payroll and paid during the Covered Period or Alternative Payroll Covered Period; and
Documentation verifying eligible loan amounts for payroll costs, covered mortgage interest payments, covered rent payments, and eligible utilities.

promissory note, dated the date of the PPP Loan, in favor of the Lender;
All unemployment compensation received by any employee of the Borrower reductions in FTE Employees during either
the period beginning February 15, 2020 and ending April 26, 2020 OR
the period beginning February 15, 2020 and ending June 30, 2020 shall be excluded from any reductions in FTE Employees for purposes of determining loan forgiveness.

What are the restrictions on loan forgiveness?

In order to have your loan forgiven, you must use the loan proceeds for payroll costs, interest on your mortgage, rent, and utilities (as outlined in the Interim Final Rule on Loan Forgiveness). At least 60% of the proceeds must be used for payroll.

Loan forgiveness is also reduced if you do not maintain your staff or pay levels. For example, if you reduce your full-time employees or their wages by more than 25%, your loan forgiveness will be reduced.

You have until December 31, 2020 to rehire employees or to restore their wages to pre-pandemic levels in order to avoid a reduction in loan forgiveness.