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The Steps You Should Take to Ensure Your Paycheck Protection Program (PPP) Loan is Forgiven

Thousands of small businesses across the United States have applied for the Paycheck Protection Program (PPP) loan being offered by the Small Business Administration in response to the COVID-19 pandemic’s devastating impact. This loan allows employers to keep their workers on the payroll and, if at least 75% of the loan is used for payroll costs, the loan will be forgiven. The key to making sure your PPP loan is forgiven is meticulously tracking how the funds are spent.

Woman on laptop computer at her small business.


If you’re a small business owner and have been approved for a PPP loan, here are a few steps to take to ensure you’re using the funds correctly—and keeping proper documentation along the way—in order to have it forgiven.

If you don’t already have one, invest in a payroll service.

If you’re not already using a payroll service, now is the perfect time to invest in one. These services are typically inexpensive, especially if you have just a few employees. They make documenting payroll easy, keeping track of all records and bank accounts in spreadsheets that are easy to read and export, which will make proving that 75% of your loan dollars went to payroll a breeze when the time comes.

Utilize an online accounting system to track your business’s expenses and income.

An online accounting system makes it simple to track your business’s expenses—employee benefits, rent or mortgage, insurance, office supplies, and so on—all of which will also need to be reviewed to determine whether your loan qualifies for forgiveness. These services can automatically generate reports and pull specific data in just a few clicks!

Be diligent in tracking every little detail.

Take the time to create a duplicate/backup file in which you track everything related to your business spending in detail. Consider pay stubs, health insurance invoices, cost of benefits, utilities, mortgage/rent, and interest on any other loans you may have taken out for your business ahead of applying for your PPP loan.

Pay yourself a salary if you’re self-employed.

According to Inc., it’s crucial that you “pay yourself a salary for your compensation to be applied to the 75 percent requirement for loan forgiveness. Many S Corp owners take out distributions during the year for some portion of their compensation. While that is a benefit of an S Corp, it is does not constitute payroll compensation as far as the PPP is concerned. However, keep in mind that the PPP program does exclude payroll over $100,000 for any individual making more than that for the year. You should consult with your accountant on how to handle your 2020 salary so you can claim the maximum amount toward the 75 percent threshold.”

If you don’t already work with a CPA, get one now.

While you may have always filed taxes, tended to bookkeeping, and taken care of payroll for your small business yourself, it’s more critical now than ever before that nothing is overlooked and everything is done by the book. Partnering with a CPA can give you peace of mind that the PPP guidelines are being followed accurately and that you’re maximizing your benefits while following the terms of the PPP loan. Note that many online accounting services do include access to licensed CPAs!

Consider keeping your PPP funds separate if you don’t already have a solid accounting and payroll system in place.

If you’re utilizing a payroll service and an accounting system, your business’s information should already be well documented and easy to track. If not, or if you’re concerned you’ll overlook something and want extra peace of mind, then you may want to keep the PPP funds in a separate account for easier tracking and transfer them to other accounts (to fund payroll, etc.) as needed.

If you have questions regarding your PPP loan—or any of the suggestions mentioned above—our Retail Sales Team would be happy to offer more guidance.

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