Brian Haines


You’ve Qualified for a PPP Loan, Now What? How to Avoid Non-Compliance as You Begin to Utilize Funds

As a small business, you may have qualified to receive a piece of the Paycheck Protection Program (PPP) funds that were allocated by the Small Business Administration (SBA) in response to the economic disruption caused by the coronavirus (COVID-19) outbreak. In addition to bolstering cash flow, SBA’s PPP will also forgive loans if all employees are kept on payroll for eight weeks and the funding is utilized specifically for payroll, rent, mortgage interest or utilities.

This past Monday, SBA reported that it had successfully processed more than 100,000 loans from more than 4,000 lenders. Assuming your small business was able to quickly turn around the application, it’s likely you received your funding (or it may be on the way as the SBA preps to process PPP round two – as an additional $310 billion in funding was granted by the SBA this week).

As organizations begin to put this funding to use, it’s imperative that the requirements for where, when and how you use these funds are top of mind as the fear of non-compliance looms. Taking necessary actions now can assist your small business down the road to reach forgiveness – you don’t want a loan (and neither does the bank at these low interest rates), you want forgiveness.

Clearview Group’s Director of Assurance & Advisory, Mike Buher, CPA, CVA and Director of Income Tax, Brian Haines, CPA breakdown key reporting requirement items to consider as you work towards forgiveness:

  • Forgiveness Surrounding Employees
    • As referenced prior, one stipulation regarding the PPP loan forgiveness states that “SBA will forgive all loans if all employees are kept on payroll for eight weeks and the money is used for payroll, rent, mortgage interest or utilities.”
    • It’s important to note that the eight-week period that is referenced commences on the exact date that the PPP funds are received.


  • Paid or Incurred – Be Consistent in The Approach
    • The law states that costs must be paid or incurred, which could be two different things depending on timing. For ease of reporting, and to best match up cash flow, it’s likely best to track things on a cash basis.


  • Ensure Rent, Utilities, Mortgage Interest are Paid and Up to Date
    • No more than 25% of the forgivable amount of the loan can be attributable to these non-payroll costs.
    • If your facilities costs include common area maintenance, do your best to get billed by lessor or estimate and pay.


  • Consider Pre-Funding Bonuses to Employees That Would Otherwise Be Entitled
    • If possible, consider matching contributions to retirement plans, such as 401(k) even if on a discretionary basis. You could also provide additional Health Savings Account (HSA) funding.


  • Compensation is Limited
    • Keep in mind, as a small business you are limited to no more than $100,000 (annualized) for one employee. This works out to $15,384 of compensation during the eight-week period.


  • Keep Track of Headcount
    • If you have had a recent reduction in employee headcount, consider bringing those employees back by June 30, 2020. They will count as Full-time equivalent (FTE) for the entire eight-week covered period.


  • Setup a Separate Bank Account
    • While this is not required, it makes this significantly easier for inflow/outflow tracking purposes as you begin to use funding
    • Support for expenditures will need to be shown, but one dedicated account will make this process more painless.


  • No Double Dipping
    • If there are employees on your payroll that receive their salaries in the form of a government grant, they need to be excluded from your total employee count.


  • Social Security Tax Deferral
    • The Internal Revenue Service (IRS) has clarified that employers receiving PPP loans (that have not have been forgiven), may be able to take advantage of the Social Security tax deferral, without incurring penalties, until the date on which the lender issues a decision to forgive the PPP loan.
    • The tax that is deferred prior to the loan forgiveness date is due under the applicable dates provided in the statute (50% by December 31, 2021 and 50% by December 31, 2022).

For more information on reporting requirements and tax implications associated with your PPP loan, contact Clearview Group’s Director of Assurance & Advisory, Mike Buher, CPA, CVA or Director of Income Tax, Brian Haines, CPA.

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