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NOTE: This article was finalized on May 15, 2020 prior to the issuance of the SBA loan forgiveness application on May 16, 2020. Check back frequently for updates. 



Over the past few weeks, the scramble to acquire Paycheck Protection Program (PPP) loans has given way to uncertainties around how to spend the money without jeopardizing the opportunity for loan forgiveness. Please note that the first link above is to the SBA's PPP Loan Forgiveness application. 

Once your PPP loan funds, you have eight weeks to use the money on approved expenditures. Guidance from the SBA has been to spend 75% of the loan proceeds on payroll expenses and the remaining 25% on mortgage interest, rent, and utilities. Specifically, qualified expenses include:

Payroll Expenses (75% of PPP loan funds should be applied to these expenses):

  • Gross payroll costs including, salary, wages, commissions or similar compensation i.e.: cash tips (up to $100k of annualized pay per employee – in other words, for eight weeks a maximum of $15,385 per FTE)

  • State and local taxes assessed on the compensation of employees

  • Costs related to group insurance premiums (medical, dental and vision) and the continuation of group health care benefits during periods of sick, medical, or family leave

  • Employer retirement plan contributions, including 401k matches and profit-sharing contributions


Additional Approved Expenses (25% of PPP loan funds should be applied to these expenses):

  • Mortgage interest payments and rental payments under a lease agreement

  • Utilities (from schedule C for self-employed individuals) including, electricity, gas, water, transportation, telephone, and internet access for service which began prior to February 15, 2020. Additional guidance includes gas used when driving a business vehicle.  Other common utilities such as garbage collection or security monitoring may also be classified as a utility but confirm with your lender.

  • Interest payments on any debt obligations that were incurred before February 15, 2020 (excludes a capital lease)

  • Refinancing an SBA EIDL loan made between January 31, 2020 and April 3, 2020

PPP money spent on the above forgivable expenses in the 75/25 percent proportions is the first step to loan forgiveness. Full loan forgiveness is subject to maintaining employee headcount and compensation levels. Any amount of the loan not forgiven must be paid back to the bank in two years at 1% annual interest.

Sounds simple, in theory, but when met with reality we end up with a lot of questions and a great deal of uncertainty.

While we await further loan forgiveness guidance from the SBA, FAL has compiled its recommendations to prepare for the process as well as created a Q&A from some of our most frequently asked questions.


Please also check out the SBA loan forgiveness application using the link at the top of the page. 



Borrowers with a PPP loan under $2 million have safe harbor and are considered by the SBA and Treasury to have satisfied the loan certification criteria.

Borrowers with loans greater than $2 million will be subject to review by the SBA for compliance with program requirements. It is important to document your basis for making the good faith certification of necessity. If, upon review, the SBA determines that a borrower lacks an adequate basis to certify the necessity of the PPP loan, then the SBA will seek repayment and notify the lender that the loan is ineligible for forgiveness.

With this safe harbor in place for borrowers under $2 million, the need to document necessity reasoning is greatly diminished but if you have already taken the steps to document, save it as back-up.

For borrowers over $2 million, absolutely document and be prepared to provide basis for your certification. FAL recommends using the points below to support your position:

  • What factors and business indicators did you consider?

  • How has the pandemic impacted your business? Use comparative data from 2019 to show swings in business metrics.

Plan Your Qualified PPP Expenses

Remove the variable of chance and plan for the qualified use of every penny of your PPP loan. FAL can provide a spreadsheet template of eligible expenses broken down by week to get you started with your PPP loan use plan. Email us at and request the “PPP Expense Plan ” spreadsheet.

Track Every PPP Loan Expense Against Your Plan

Have a PPP loan tracking system in place to track the actual vs. planned use of the funds. A couple of ideas to make tracking easier are to place the funds in a separate bank account or create separate PPP GL accounts.

Know the Numbers

When it comes time to calculate loan forgiveness, make sure you have the numbers ready and that they support your overall case, for example: employee and compensation levels must be maintained during the covered eight-week period to be eligible for full forgiveness and you’ll want comparison periods to back up your data. FAL has a spreadsheet that can help you prepare now for the upcoming loan forgiveness process. Email us at and request the “PPP Expense Plan ” spreadsheet.

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