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Do’s and Don’ts of Using PPP Loan Funds

posted on May 14, 2020 in Business

Updated: July 31, 2020

Download PPP Loan Funds Do’s and Don’ts Checklist

Congrats! You received your PPP loan funds. Now what?

A couple weeks ago, we published our Do’s and Don’ts of PPP loan funds as a slideshow guide on LinkedIn. Well, that went over better than we expected. In fact, it’s now being used by the SBA for educational webinars.

We originally created the one-page version of the checklist for our PPP loan customers. But then we figured, if this is helpful for our customers, it’s probably helpful to all small business owners with PPP loans—in Houston, Texas, and the rest of the nation.

Why? Well, because there’s been lots of confusion around the CARES Act and PPP loans.

  • Does my business qualify for a PPP loan?
  • Which banks are SBA lenders?
  • What can I use PPP funds for?
  • How can my PPP loan be forgiven?

To help small business owners better understand their PPP loans, we decided to answer some of the most important questions around how to use PPP loan funds.

DO: Use the funds for payroll and authorized expenses only

Your PPP loan is to be used for payroll costs, group healthcare expenses, and other authorized costs, such as your business mortgage expenses or rent, utilities, and interest payments on other debt.

DON’T: Use the funds for other things

Make sure you use your loan only to pay for authorized expenses. You should expect to be audited by the bank or government officials. By avoiding misuse of the funds, your loan may be fully forgivable.

DO: Be organized

Keep records of how you use your loan funds. Opening and using a separate deposit account for the PPP loan funds can make this easy and streamline any auditing process. Contact a TCB banker to find out more about business deposit accounts.

DON’T: Mix loan funds with personal assets

Again, to keep things easy to track, avoid depositing your PPP loan funds into a personal account and avoid the temptation of using the funds to pay for personal expenses.

DO: Keep the rules in mind

Remember that your PPP funds need to be used immediately for authorized costs incurred during the eight weeks immediately following the loan’s origination. Also, at least 75 percent of the forgiven amounts must be used for payroll expenses during that time.

DON’T: Attempt to cheat

Unscrupulous borrowers may try to take advantage of the law’s gray areas, but please don’t. Again, the bank or representative from the government is likely to perform an audit. The last thing you want is to be caught in an act of fraudulent use of funds.

DO: Use the funds for payroll and authorized expenses only

Your PPP loan is to be used for payroll costs, group healthcare expenses, and other authorized costs, such as your business mortgage expenses or rent, utilities, and interest payments on other debt.

DON’T: Use the funds for other things

Make sure you use your loan only to pay for authorized expenses. You should expect to be audited by the bank or government officials. By avoiding misuse of the funds, your loan may be fully forgivable.

We hope these guidelines give you a better understanding of your PPP loan and how to use the funds. For answers to more PPP-related questions, we highly recommend you take a look at the SBA’s website, where they are regularly updating PPP FAQs.

Want to save these PPP loan tips for later? Click the link below to download our PPP Loan Do’s and Don’ts Checklist.

Download PPP Loan Funds Do’s and Don’ts Checklist

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