10 Keys to Getting Your PPP Cash
Updated: Apr 8, 2020
1. Get on SOMEBODY’s list: Every bank is independently deciding from whom they will accept #Paycheck Protection Program applications. Some only want applications from customers with deposit accounts active before Feb 15, 2020. Some only want active loan customers. Some might accept from business credit card holders. Few will take applications from non-bank customers. Check with every bank with which you do consumer or commercial business. Find one that will accept your application, then get on whatever list they are keeping, so you know when and how to apply. Otherwise you may get left in the dark.
2. OPEN a Separate Bank Account: Some or all of your #PPP loan may be forgiven, but you have to prove how you spent the PPP cash. The easiest way to track qualified expenses is to run them through a new business checking account. Open it before you submit your PPP loan application and include the new account as the destination for your PPP loan proceeds. This up-front effort will save a lot of sorting and totaling later.
3. Submit EXACTLY What the Bank Requests: Banks individually administer PPP loans, not the #SBA. Each bank decides what documentation it wants, and it varies a lot. There is a lot of confusion around date range definitions and types of payroll & taxes to include or exclude, and it changes daily. When in doubt, ask your bank.
4. Pay ONLY PPP-Qualified Expenses: How much of your loan is forgiven will depend upon how carefully you spend the cash over the 8-week expense period. Any unqualified expenses will not be forgiven. By paying JUST PPP-qualified expenses from that new checking account, that account’s statements (with some backup documentation) should maximize your loan forgiveness.
5. Fund Payroll from PPP Account (maybe): If you can easily change the payroll funding (checks or direct debits) over to the new checking account, do it. But if you auto-draft state and federal taxes directly to the agencies, don’t. It’s unlikely you can change these cleanly at the beginning and at the end of the PPP expense period.
6. Use Separate AP Runs: Separate your PPP-qualified expenses and pay them in extra AP runs out of your new PPP checking account. That will decrease the chance of paying something from the wrong account (PPP expense out of Operating, or non-PPP expenses from the new PPP checking account). It’s all about expense separation.
7. Offset Wrong Account Expenses: If you accidentally pay something from the wrong account, make an immediate transfer: 1) for the exact erroneous amount paid, and 2) on the same date as the erroneous payment. This will make it easy to match the in and outs later for proof of expenses. Do NOT combine erroneous amounts which would creating a tracking nightmare when you try to document your PPP expense for PPP loan forgiveness.
8. Stay In-bounds, Don’t Cheat: The PPP is an incredibly generous program. Don’t screw it up. This is not the time to sneak the boat-slip rental payment into the game. You want your forgiveness application (yes, a second application down the road) to get approved without question. Unqualified expenses in your PPP account may decrease your forgiven amount, and might kick your forgiveness application into the “later” pile. You don’t want either of those outcomes.
9. Make It Easy for Your Banker: Only send what you banker requests and ensure the pages are readable and understandable. Your banker will have a ton of PPP loan and forgiveness applications, so make life easy. But also make copies of everything you reference while completing your applications and put them in a “PPP” file. Mark them so you can tell exactly how you determined the numbers you entered on the applications. If the bank questions something, the faster you return crisp answers, the faster your applications get approved.
10. Reuse PPP Account for EIDL: Some businesses will also apply and get an SBA #EIDL loan after the PPP loan. If your 8-week PPP expense period has ended, then you can reuse that new checking account to track your EIDL in the same manner. If the two programs overlap on your books (which they might with an up-front EIDL $10K advance), then you’d be better off opening a second new checking account to track the EIDL.
© 2020 - MicroCFO, LLC - April 7, 2020
www.MicroCFO.com 704-643-4643
AmbroseKalmbach@MicroCFO.com