The Paycheck Protection Program or PPP is a government funded program aimed at incentivizing small business owners to keep operating. The program offers up to $10 million in funding and is up to 100% forgivable. To qualify for loan forgiveness, at least 75% of the loan must be used on payroll. This means that using more than a quarter of the loan on other business expenses outside of payroll will result in paying back the loan amount.
How is the PPP Loan Forgiven?
For some, the Paycheck Protection Program is a difficult loan to use. In order to be eligible for loan forgiveness, 75% of the loan amount must be spent on payroll. The business expecting loan forgiveness must submit a request for forgiveness. In order to be eligible for loan forgiveness, a business must submit an application for forgiveness within 90 days after the 8 week loan term. This is a hard deadline and you will not be eligible for loan forgiveness if you do not apply for it within this 90 day period.
In order to be eligible for loan forgiveness, a business must submit an application for forgiveness within 90 days after the 8 week loan term.
During a shutdown where operations may be halted and employees may not be working, this can prove difficult. In other cases, it can be hard or morally questionable to ask employees to risk their health and go back to work. The PPP under its current guidelines does not allow forgiveness if using the funds to cover business expenses during the shutdown besides payroll. The PPP forgiveness guidelines can be confusing as they state this funding is aimed at payroll, utilities, rent, etc. But note that unless 75% of the funding is spent on payroll, the loan will not be forgiven.
The PPP forgiveness guidelines can be confusing as they state this funding is aimed at payroll, utilities, rent, etc. But note that unless 75% of the funding is spent on payroll, the loan will not be forgiven.
Further, the expenses that the PPP are aimed at are typically deductible from total income. With the PPP however, these costs are no longer deductible from what you will pay in taxes. This means that the PPP is not tax-free, and business owners should account for paying taxes on the funding received.
How Can You Repay Your PPP Loan?
If the funds are employed to cover expenses other than payroll, this means you will repay the loan. The interest on the loan is low, but will your business be able to afford repayments once the storm is over? This is where other financing methods can come in handy. You need to be able to cover payroll which the PPP will help with. Then, invoice factoring services can be used to improve cash flow and cover your other business expenses. By combining both the PPP and factoring, your business can cover both payroll and operational costs, utilities, and supply costs.
How Can Invoice Factoring Help?
Invoice factoring is a debt free form of financing. There are no repayments! Your business has the cash on hand to stay strong during the shutdown and recovering afterwards. Factoring services are flexible, and the funding amount grows with the needs of your business. This means that factoring your open invoices gives you the ability to make any supplier payments or repayments on your PPP loan.
What is Factoring?
Factoring is an advance on your receivables. This means that as you make sales, you get immediate cash from your invoices. Your customers pay after credit terms expire, and Eagle Business Credit pays your company immediately. You can cover rent, utilities, and the costs of acquiring new or larger purchase orders. Your business has the reliable cash flow needed to stay strong and even grow.