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SBA PPP Loans: What You Need to Know

Man and woman doing calculations

With the recent refunding of the SBA Paycheck Protection Program, there are a few details that you should know before you decide to apply.

If you take out an SBA PPP Loan, you are required to spend 75% of that loan on the payroll. Any additional unused funds will be deemed as a loan at a 1% rate for 2 years with a 6 month deferral period. The 25% remainder must be spent on operating expenses (rent, utilities, etc.). Any remaining funds will then be turned into a non-forgivable loan at a rate of 1% for the following two years.

For example, if you receive your loan and your employees make over 100k, and your accounts are considered to be “co-mingled”, so you won’t be able to determine where the loan funds were allocated. Therefore, your loan will become non-forgivable.

The best way to avoid this is to ensure that any funds from your SBA PPP loan should be well-documented and easily traced. Create a new account for your SBA PPP loans and track all funds used within that account. 

For more information on the SBA PPP loan, visit our COVID-19 resource page.