COVID-19 | Accounting for the PPP Loan

This has been a busy week for business owners applying for the loans and grants in the wake of COVID-19 shutdowns. For purposes of the Paycheck Protection Program (PPP) loan and how it’s calculated there have been a lot of discussions around how to properly document your financial need. Recently, the SBA has come out to clarify many of the sources of confusion. Now that we have been given that clarity, we are going back and looking closer at those disbursed loans.  

According to Jeff Drew at the Journal of Accountancy, here is how the latest clarifications are impacting small businesses who have applied to the Program:

The CARES Act permits the PPP’s forgivable loans to pay for up to eight weeks of payroll costs, including benefits and other costs. In addition to payroll, recipients also can use PPP funds to pay interest on mortgages, rent, and utilities.

Small businesses applying for PPP loans must submit documentation, such as but not limited to payroll processor records or payroll tax filings, that establishes their eligibility for the loans. The interim final rule issued Thursday clarified that the SBA will allow lenders to rely on the borrower’s documentation to determine if the borrower is eligible for the loans. Lenders can accept e-signatures and e-consents. Lenders who comply with the obligations laid out in the interim final rule will not be held responsible if the borrower submits fraudulent or inaccurate information.

(Editor’s note: On April 6, the SBA posted an FAQ document for the Paycheck Protection Program. That information is available here.)

Those who were first in line to fill out the Program loan may have used an estimate that might not be validated when they go to prove their expenses for the loan forgiveness. We are working hard for our clients to gather appropriate accounting that should have been submitted as the application amount. Making sure we are recording appropriately that records are updated, following in real-time, to give a reference of expenses versus loan depletion. If the wrong amount was given, we’re helping them plan for that and if there is something else they can include or do they need to back up and do something different? We are here to assist our clients through these ever-changing tides. We are all in this together and ready to get our team to work alongside yours!