Paycheck Protection Program (PPP) Loan Forgiveness – Arizona

If you have applied for and received funding under the Paycheck Protection Program (PPP), then we hope that it helps you through this difficult time. While using the funds to keep your business open and thriving is the primary goal, a close second to that goal will be to obtain maximum loan forgiveness.

Here are some things that you should be aware of when looking to ensure you maximum loan forgiveness. 

How Can I Spend the Loan Funds?

The SBA says that you can use the loan funds for payroll expenditures. These “payroll expenditures” consist of salaries, wages, and all other cash compensations paid to employees up to $100,000 of annualized pay per employee. These include state tax expenses, retirement benefits, and healthcare benefits paid for employees, but it does not include employer expenses such as Medicare taxes and the employer portion of FICA. 

You can also use the loan funds for “non-payroll qualifying expenditures” such as mortgage interest, lease payments, utilities, and business debt interest only if you had it before February 15, 2020. However, please understand that you cannot use any portion of this money to pay for Emergency Paid Sick Leave to employees.

What Restrictions are There?

The current SBA rules require that funding recipients use 75% of the funding proceeds for payroll expenditures. This means you can only use up to 25% of the funds received for non-payroll qualifying expenditures. In addition, you must keep your number of full-time equivalent employees the same, and you cannot reduce your payroll expenses below 75% of your previous payroll expenses.

In other words, you cannot change your number of full-time equivalent employees, and you cannot reduce your payroll expenses by more than 25%. If these criteria are not met, then you will not be eligible for loan forgiveness. If you do reduce pay or the number of full-time equivalent employees, then you have until June 30, 2020 to take the necessary corrective actions.

When Do I Have to Spend the Funding?

You have eight weeks from the time that you receive funding to use the funds in a qualifying manner. Any payments made outside this eight-week period will not be eligible for forgiveness.

How Should I Track the Funding?

It is the best practice to hold all of the fund proceeds in a separate bank account and make all qualifying expenditures relating to the funds from that bank account. This will make every cent that you spend traceable to determine if it was used for forgivable reasons.

Are the Rules From the SBA Regarding Loan Forgiveness Final?

No, the rules are not final. It is likely that the SBA or the Department of Treasury will provide additional guidance on loan forgiveness qualifications.

What Happens if Your Loan is not Forgivable?

Even if some amount of your loan is not forgiven, you have the option to either choose to pay back the funding amount at the end of the eight-week period without penalty or interest, or you can keep the loan outstanding for two years from the date of your loan forgiveness application and pay the low 1% interest rate as a tax-deductible business expense. 

There is also an ability for companies to qualify for an Employee Retention Credit offered by the IRS (click here).

Contact Counxel Legal Firm

We are here to help business owners get through this interesting time. To get the help you need, contact us at (480) 744-6621 or at Don’t forget to check out the good things that others are saying about the services they received from Timothy Coons on Google.

This article is intended for informational purposes only and does not constitute legal advice for your specific situation. Use of and access to this article does not create an attorney-client relationship between you and Counxel Legal Firm. Please contact or (480) 744-6621 to request specific information for your situation.

*Conveniently located off the 101 Freeway and the US 60 in the middle of Phoenix, Scottsdale, Tempe, Chandler, Gilbert, Mesa, and Queen Creek!

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