What Is Paycheck Protection Program And How Does It Concern Me
The US Paycheck Protection Program is a $699-billion loan program established by the US Government CARES Act to help small businesses, self-employed workers, and other related businesses continue paying their workers in this Covid-19 down time.
The Paycheck Protection Program allows you to apply for a private loan with a very low interest to help you finance your payroll and other business costs.
The PPP loan program allows you to access about 2.5 times your average monthly payroll costs which could be forgiven if you keep your employee count and wages stable (that is, you do not have to fire any staff or reduce their salaries for you to have a chance at the loan forgiveness).
How To Know If You Are Eligible For The Paycheck Protection Program Loan
To be eligible for the US Paycheck Protection Program, you have to be a small business owner, independent contractor, sole proprietor, self-employed person, a nonprofit, a veteran organization or even a tribal business who was in business on or before February 15, 2020 and must have either had people employed under you or even paid your independent contractors by that time.
There are however other things that determine your eligibility like the average number of employees you have (you have to meet the Small Business Administration industry standard size), must have 500 or fewer employees worldwide, and then, have a net worth that did not exceed $15million by March 27, 2020.
How To Use The Paycheck Protection Program Loan Wisely
1. Get an effective payroll system.
No BS. If you are not using an effective payroll service, now is the time to dig into it. The funny thing about the PPP loan system is that though it is forgivable, you still have to meet certain requirements.
When it comes the time to pay back the check or verify if it would be forgiven, you would need to dig into several paperwork in your office and bank accounts. This much paper work can be drastically reduced if you use an effective payroll service. They are actually not very expensive with some of them less than $100 per month if you have few employees.
You shoulg get a good payroll service because getting a payroll service like Paychex or other similar but effective services would automatically keep all that you need to verify your forgiveness or payments at the push of a button.
2. Keep The Loan Funds Separate From Other Funds.
For you to precisely track every transaction that involves the PPP loan, you need to keep it where other funds would not interfere with it. I hugely advice that you keep the loan funds in a separate account, that way, your account statement for that account would make it easy for you.
This is not a government requirement but a straight-forward advice that should help you stay away from unnecessary headaches involved in trying to figure out which fund was used for what.
3. Pay Yourself If You Are Self-employed.
One of the benefits of being self-employed is that you have access to all funds by yourself without anyone prying into it. However, since this is a PPP loan, you have to pay yourself a certain amount monthly in order to qualify for its forgiveness.
Nobody really likes to repay loans that much and so, to avoid repaying, you must do everything to stand a chance to not repay the Paycheck Protection Program loan. Be sure to keep every salary documentation as they would be required on doomsday.
Keep in mind however, that you must not pay yourself more than $100,000 a year which means that you should not exceed an average of $8300 a month in self-salary. If you do not know how to handle this, you should consult an experienced accountant on how to go about your salary.
4. Get a Certified Public Accountant (CPA)
Do you know any good CPA? Now is the time to have that drink with them. The benefit of a Certified Public Attorney cannot be underrated when it has to deal with the Paycheck Protection Program loan. Doing your own tax filling, payroll and book keeping is fine but now is not the time to make any mistakes or leave anything to chance.
With the Paycheck Protection Program guidance always changing, now is the time to hand over to a professional in the field to avoid making little mistakes that would end up costing you more. If you do not know any trusted one, there are many online accounting systems that come with an effective CPA package as part of their service.
With everyone worried about how forgivable this loan is and how flexible the rule guiding it has become, it is now of a very great importance to play by whatever rules it has and maximize the use of the loan fund. As long as guidelines are in place, play by the rules.
The loan is for your benefiting but it can also serve as a facilitator of doomsday. Except you have an alternative loan, the PPP loan scheme would keep you afloat if you use it wisely.