Construction Law

5 Tips for Navigating Your Way Through the Paycheck Protection Program (PPP) featured image

5 Tips for Navigating Your Way Through the Paycheck Protection Program (PPP)

If you were fortunate enough to receive funding through the Coronavirus Aid, Relief, and Economic Security (CARES) Act’s Paycheck Protection Program (PPP), it’s important that you understand the next steps to take when you put that money towards your business. In this article, a Hillsborough County construction lawyer will provide you with five tips to help you successfully navigate your way through the PPP process. For forgivable loan advice, consult the construction attorneys at Cotney Attorneys & Consultants.

1) Create a Seperate Account for the Funds

The first step we recommend is to create a separate account for the relief funds received through the PPP. Although this is not a requirement, businesses can easily track the funds they received if it’s in a different account than the rest of their operations. Remember, to improve your odds of being eligible for the benefits of this program, you need to effectively track your expenses.

Related: What Contractors Need to Know About the Paycheck Protection Program

2) 75 Percent of the Funds Go to Payroll 

The vast majority of loan proceeds have to be used for payroll expenses. In fact, the magic number is 75 percent. There are no exceptions to this and it’s critical that business owners comply with this requirement. 

3) The Remaining Funds Have to Be Spent on Specific Things

Business owners may think that they can spend the remaining 25 percent on whatever they want. Think again. There are specific requirements in place for exactly what the remaining 25 percent can be allocated towards, including healthcare costs, mortgage payments, rent payments, and utilities. The safest approach is to use all of the funds on payroll if you can. If you can’t, consult an accountant or our Hillsborough County construction lawyers to confirm what the remaining funds can be spent on. 

4) Understand the Loan Forgiveness Process

Loan forgiveness is determined based on the eight week period after you receive proceeds. Here is an example of a business’s potential loan forgiveness:

  • A business receives a PPP loan of one million dollars
  • They spend $500,000 in the first eight weeks
  • They properly allocate $375,000 (75 percent) towards payroll expenses 
  • The business is potentially eligible for a maximum loan forgiveness of $500,000 

Related: Dealing with the Paycheck Protection Program During the COVID-19 Pandemic

5) The Loan Forgiveness Total is Not a Given

We stated above that the “potential” maximum loan forgiveness would be $500,000 because the forgiveness amount is never a given. There are a variety of factors that can result in proportional deductions, including payroll costs. 

Final Tips: It’s critical that contractors keep proper documentation of all their expenditures, as this is a highly regulated federal program. Remember, focus on payroll first and then shift to other allowable expenses. For advice on credits, deferrals, and programs available to construction businesses under these new laws, consult a coronavirus construction attorney. 

If you would like to speak with a coronavirus construction lawyer, please contact us today.

Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.