Ensuring Your PPP Loan is Forgiven

In an economy that is constantly changing and shifting due to COVID-19 and subsequent stay-at-home orders, one of the more enduring programs has been the Paycheck Protection Program (PPP). Funding for the original round went quickly, with an additional round soon after and more, possibly, on the way. 

For small business owners simply trying to keep afloat, there are many appealing features of the program. Even if PPP loans you receive are not forgiven, the interest rate is only 1 percent. Additionally, you have five years to pay back the funds. However, the ultimate objective of all PPP recipients is to have the loans forgiven. This blog will explain the general obligations of small business owners for the purpose of PPP loan forgiveness. 

PPP Funds May Only Be Used For Specific Expenses

The main purpose of the PPP is to keep the country’s unemployment rate from soaring (more than it, unfortunately, already has). To make sure borrowers fulfill this objective, there are stipulations that at least 60 percent of PPP funds must be used to cover (cash) payroll expenses for employees. You are permitted to cover payroll expenses for an 8- or 24-week period for each employee who earns $100,000 or less. 

To ensure that your eligibility for forgiveness is maximized, you need to spend the PPP funds before the end of 2020 and keep all employees on your payroll (exceptions are made for workers you terminate for cause or otherwise cannot keep on your payroll after efforts are made to rehire or retain them). 

Non-Payroll Uses

Businesses who receive PPP funds are not obligated to spend every dime on payroll for employees. In fact, borrowers may spend up to 40 percent of the money received on:

  • Mortgage payments for the business on real or personal property
  • Rent payments for the business on real or personal property
  • Utility payments for the business
What Documents Do You Need?

Along with your forgiveness application (which should be completed soon after the last pay period ends), you need to include certain documentation. These include common forms like various tax forms, reports from any third-party payroll service providers, Form 941 (payroll tax filings), and other forms that document payroll expenses. A copy of your commercial lease and utility bills will also be needed. 


While most of the requirements for PPP forgiveness sound fairly straightforward, federal agencies certainly have their guard up for potential fraud. There have already been prosecutions related to misuse of PPP funds. If you find yourself under scrutiny due to a supposed error on your PPP forgiveness forms, feel free to contact us, we are here to help.

Latest posts by Robert V. Boeshaar (see all)