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How Brokers Should Track Their PPP Loans

Keith Griffin
Apr 21, 2020
Dollar bill | Photo by NeONBRAND on Unsplash

The Paycheck Protection Program, administered through the Small Business Administration and local banks, provides relief to businesses in the form of loans that potentially turn into grants. Just like any government program, though, there are guidelines that must be followed and could trip up brokers that are not diligent about how the funds are used.
Philadelphia accountant James Brower, writing for the Philadelphia Business Journal, says, “Presuming you’re the owner of or a decision maker in a business … who has received, or will receive, a PPP loan, the issue now becomes what can you do with the money and how can you ensure that you will receive the maximum amount of loan forgiveness? Unfortunately, we do not yet have much in the way of guidance from the SBA on these issues, although regulations are supposed to be issued by April 26.”
Brower, a partner in the Philadelphia office of accounting and advisory firm Marks Paneth LLP, said this is his personal interpretation of the statute and the limited guidance that has been issued so far.
He said it’s vital for all borrowers to create a good audit trail. “Loan recipients who apply for forgiveness will have to provide records to their lender which show how the funds were expended,” Brower said.
It’s also important for borrowers to know they have eight weeks from the date the loan is funded to disburse the money, Brower explained. That could mean issuing payroll early if needed to fall within the guidelines.
Also, he counseled, it’s important to track the 25% that can be spent on non-payroll expenses. “[W]hile you can still pay rent, mortgage interest and utility bills, if more than 25% of the loan proceeds are spent for those purposes that excess won’t qualify for forgiveness,” Brower said.
He also said there is an additional “penalty” provision in the law which provides that if, during the payout period you have cut the pay of any individual employee by more than 25% of what they earned in the first quarter of this year, that cut in pay will result in some of the loan not qualifying for forgiveness unless the pay cut is restored by June 30.

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