Dispatch #36 - Maximizing PPP Loan Forgiveness
If your company received a PPP loan and you’re confused about how to spend the proceeds, you’re not alone. See, for example, this New York Times article, in which business owners raise vexing questions about how and even whether to spend their PPP loan funds. That said, I’m advising the contractors I work with to spend their PPP money per the guidelines below, then repay the unforgiven portion if any.
Use most of it for productive payroll, strategically supplemented by rent and other overhead expenses. By “productive payroll”, I mean payroll essential for today’s operations and/or to restart the business. Some construction companies intend to use a portion of PPP funds as make-up wages, but this gives me pause for several reasons, including the negative cash impact of FICA taxes and worker’s compensation, which are not eligible for forgiveness.
Use a PPP loan forgiveness calculator, or several, to round out your company’s strategy to maximize forgiveness. I have provided two examples below. And ask your bank for their calculator, too.
Track and document PPP loan-related expenditures thoroughly, clearly, and in a well-organized manner. Demonstrating your firm’s compliance with the spirit and letter of the law will reduce the risk and admin cost of an audit.
Here or some additional resources:
See post #5 in this CFMA thread about the updated, tighter SBA requirements for a business’ eligibility for PPP loan funds, including the link to a CAMICO (insurance) “business client notification” Word document.
CFMA discussion thread and PPP loan forgiveness calculator.
Acuity PPP loan forgiveness calculator (thank you to long-time colleague Alexa Gregory for sharing this link with me), which also includes a link to AICPA PPP forgiveness information.
Look for additional clarification from the government, sure to follow.
On a final note, apply for loan forgiveness in early July, after the June 30th payroll deadline has passed.
Need help with this or other financial matters faced by construction contractors? Let’s talk!
David Stern CFO makes every effort to provide useful and accurate information. This content, however, is not intended as a substitute for specific business-related financial advice. We disclaim all warranties and liabilities from its use.