Paycheck Protection Program (PPP) loans may potentially be the most attractive government loans in history. Want a 1% fixed APR? Check. High approval rate? Check. On their own, those 2 features would be enough to win the hearts of small business owners who desperately need a financial lifeline in the face of the coronavirus pandemic. But we know that’s not the primary draw for most people because PPP loans come with an even more appealing feature: potential loan forgiveness. That’s right—Congress allocated about $284 billion from the $900 billion coronavirus relief package to support our nation’s small businesses. So if you follow the guidelines and track your finances, you can potentially have as much as 100% of the loan’s principal forgiven. What Expenditures Do You Have to Track for Forgiveness? Allowed uses for potential loan forgiveness fall into 2 primary categories: payroll costs and other business expenses. The full list of what falls into those categories includes: Your Business’s Payroll Costs This category is the most important part of this program dedicated to protecting paychecks. A minimum of 60% of your loan funds must be spent on payroll if you want to have a chance of full forgiveness. Approved expenses within the payroll category include: \tCompensation in the form of salaries, wages, commissions, or similar compensation up to $100,000 \tPayment of cash tips or equivalent \tPayment for vacation, parental, family, medical, or sick leave \tAllowance for dismissal or separation \tPayment of retirement benefits \tGroup vision, dental, disability, or life insurance \tPayment of state or local taxes assessed on the compensation of employees Your Business’s Other Business Expenses This category is surprisingly broad, allowing you to use 40% or less of your funds on many crucial expenses. Approved expenses include: \tHealthcare costs related to the continuation of group healthcare benefits during periods of sick, medical, or family leave, as well as insurance premiums. \tMortgage interest payments (but not prepayment or payment of the mortgage principal) \tRent \tUtilities \tInterest on any other debt obligations incurred before February 15, 2020 \tRefinancing an SBA EIDL received between January 31, 2020, and April 3, 2020 \tCovered expenditures such as business software or cloud computing services that facilitate: \tbusiness operations \tproduct or service delivery \tthe processing, payment, or tracking of payroll expenses, human resources, sales, and billing functions \taccounting or tracking of supplies, inventory, records, or expenses \tCovered property damage costs \tCovered supplier costs \tCovered worker protection expenditures Track ‘Em As You Spend ‘Em Inputting all your PPP expenditures at the end of your eligible loan forgiveness period is the bookkeeping equivalent of cramming for a big test the night before. Sure, you may still pass, but it’s going to cause more drama and at least 1 sleepless night. Set yourself up for success by tracking your expenses as you incur them. It’ll reduce stress and leave you better prepared. Plus, if any issues arise, you’ll have more time to deal with them. Categorize Correctly To increase your likelihood of a smooth and successful loan forgiveness application, you need to correctly categorize each of your expenses. This activity can be done manually, or your accounting software may be able to automatically categorize each expense, reducing some of the guesswork and manual labor. The last thing you need is another tedious task preventing you from getting back to running your business. Provide Necessary Documentation Like a Real Housewife at a reunion special, the SBA will say, “Show us the receipts.” You’ll need to provide payroll documents and proof of things like utility bills and rent or mortgage interest payments. Bookkeeping software can seamlessly add these details to each expenditure type so that it’s well-organized and ready for when the SBA wants to check your work. Use Bookkeeping Software to Reduce the Chance of Errors Tracking your expenses through software actually helps you in myriad ways. As mentioned earlier, it makes categorization a breeze. You can easily attach receipts and provide necessary documents. Plus, the software will ask you for the required information for effective tracking, reducing the risk of mistakes. When it comes to loan forgiveness, you don’t want to take chances that might forfeit your chances. Outsource Your Loan Forgiveness Preparation You can take the unease and effort out of the loan forgiveness preparation process by working with Lendio's software to prepare your loan forgiveness application. Here’s how we’re helping small business owners: \tEasier expense tracking \tAutomatically categorize expenses in approved categories \tProvide a complete packet to submit to your lender \tSuite of resources, including a helpful checklist \tProvide support if you have any issues after submitting the application Our interface and resources are all engineered to make bookkeeping feel like less of a drag. With our help, you can streamline the PPP loan experience and potentially give yourself a better chance for a substantial portion of the loan being forgiven. Disclaimer: The information provided in this post does not, and is not intended to, constitute business, legal, tax, or accounting advice. All information, content, and materials available in this post are for general informational purposes only. Readers of this post should contact their attorney, business advisor, or tax advisor to obtain advice with respect to any particular matter.