Small Business Owners: 3 Tips to Maximize PPP Loan Forgiveness

As a small business owner, who has received a paycheck protection program (PPP) loan, you are probably as confused as I was about what to do to ensure you get the maximum amount of the loan forgiven. As a veteran small business owner, whose business was hit hard by COVID-19, we were hungry for information about what were the right steps to take to ensure we had the best chance of getting the full loan forgiven. In our quest for information, we found two great articles that really crystalized the key 3 things we could do.

The first article is by Brian Thompson titled “SBA Finally Clarifies PPP Loan Forgiveness Rules: Full Forgiveness For Self-Employed Borrowers” published by Forbes. In this article, he reviews the latest changes to the forgiveness rules covered by the Flexibility Act. The flexibility act provides a couple of crucial updates that will greatly impact your ability to qualify for forgiveness. First, the covered period was extended from 8 weeks to 24 weeks. Second, it lowered the bar on the amount that you had to spend on payroll expenses from 75% to 60%. Finally, it extended the time for you to rehire or restore salaries from June 30th to December 31st.  These are all key wins that increase all of our chances for forgiveness.

The second article is by Jeff Drew titled, “New PPP loan forgiveness applications released” in Journal of Accountantcy. In this article, Jeff covers two important areas. First what is and is not covered as part of payroll, specifically for small business owners. First, while health insurance costs for S corporation owners cannot be included, retirement costs can. Second, the original compensation was capped at $15,385 per individual over the 8-week period. Now, the maximum for full loan forgiveness at $46,154 per individual. This allows owners a significant amount of additional flexibility.

After reading these two articles along with many others, we came up with these 3 tips to help maximize your chances of qualifying for forgiveness.

1. Focus on Payroll – You now have until December 30th, so try to get as many of our furloughed workers back on the job before the end of the year.
2. Use Total Compensation – As Jeff, points out, the PPP covers more than wages, it covers benefits as well, so make sure you are not undercounting.
3. Don’t Forget Retirement – For owners, remember, retirement contributions count, so make good use of the new yearly maximum per individual.

In summary, for small business owners looking to increase your chances of PPP loan forgiveness, don’t forget to focus on maximizing payroll by using total compensation and including retirement investments.