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, 20 April, 2020

Three Options to Stimulus Loan Forgiveness

We are entering the second month of the shutdown. Many of our clients have received their PPP loan funds, no doubt, with a sigh of relief. With money in hand, attention is turning to forgiveness. The percentage of funds used for payroll costs is key to ensuring forgiveness takes place. Using 75% or more of the PPP loan funds for Payroll likely will result in loan forgiveness.

Lesson: To get your PPP loan forgiven, spend the money in the eight weeks after the loan origination date.

There are three options for using your PPP loan.
Option 1 – Get your PPP loan and pay it out to your team. Keeping your team on your payroll throughout the shutdown is a great option. You’ve trained your team to work seamlessly in your business. Continuing to pay your team is an extension of the original investment, and you will be ready to go back to work when the opportunity arrives.

Option 2 – Get a PPP loan now, save it for when we open.
I can take the loan now, leave employees on unemployment, save the cash for when we reopen, then pay the loan back over two years at 1%.

Option 3 – Whether by accident or design, you didn’t get PPP funds before the money ran out. Team members have access to unemployment until you reopen and can rehire them. The employee-retention credit will pay 50% of wages, up to $5,000 (per employee) for wages paid after March 12, 2020, and before January 1, 2021. The subsidy is in the form of a tax credit against quarterly payroll taxes. You may apply for an advance payment on Form 7200. Note that the credit is not available if you received a paycheck protection program loan.

You may want to wait to decide on how to use employee-retention credit funds. Additional PPP loan funds may become available in the next few days.

For more information, check out the IRS’s retention credit information website at

Note: The material and contents provided in this article are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.

Ed Gabriel, CPA is President of DrillDown Solution and a graduate of Brigham Young University. His clients benefit from over 40 years of experience in maximizing profits, minimizing taxes and putting them in the best financial position possible.