PPP funds putting some small business owners in a bind

As business owners across the U.S. finally receive Paycheck Protection Program loans, many are now unsure what they signed up for, Inc. reports.

Some are realizing the challenges of meeting the demands of the potentially forgivable loan, while others say the program’s changing requirements are forcing them to rethink their participation, arguing they would rather be destitute than in debt.

Generally, business owners are advised to operate within the intent of the law, so how do they spend the money the wisest way and also get the dollars forgiven? 

Legal advisers suggest businesses keep the following in mind:

• Allowable expenses and forgivable expenses are not mutually exclusive. Allowable expenses—which include payroll, rent, mortgage interest payments, and some utilities—can be forgiven if you apply PPP funds toward them within the eight-week covered period. But even if you don’t spend all of your PPP in that timeframe, those expenses are still allowable; they just won’t be forgivable. 

• Think of your PPP as a loan rather than a grant. Once you take the forgivable part out of the equation, you’re left with a loan that can be used more freely and that comes with pretty generous terms, like a 1% interest rate, no fees and a six-month payment deferment.

• Keep separate accounting for how you’re spending that money. Work with an accountant to ensure you’re correctly categorizing and tracking your expenditures.

• Very few businesses are going to have 100% of their loans forgiven. Naturally, you should aim to get your loan forgiven, but don’t necessarily sweat it if it isn’t.

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