As businesses scrambled to get a loan under the Paycheck Protection Program (“PPP”) that was created under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), they must now decide how to use those proceeds so that they are both consistent with the law and maximize loan forgiveness.

If after getting the loan, you don’t really need the money consider giving it back, because if you really don’t need the money, you might not have been eligible in the first place.  The law says that you have to certify “that the uncertainty of current economic conditions makes necessary the loan request to support the ongoing operations of the eligible recipient.”  The SBA recently said that “Borrowers must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business.”  So with that guidance alone, you have to decide if you need the money.  If you decide you don’t need the money and don’t want to risk violating the law, the SBA has created a “limited safe-harbor” that says you can payback the loan by May 7, 2020 and rest assured that you have not violated the law.

If you decide to keep the money, here is a step-by-step guide to preserving your ability for maximum forgiveness based upon what we know today.

First, put the money in a separate account so that you can track every dollar spent. You can only use the money for certain “Allowable Uses” including:

Photo of Steven Thayer Steven Thayer

Throughout his career, Mr. Thayer has been heavily involved in the formation, financing, and operation of business enterprises in a variety of industries both domestically and internationally.  His industry experience includes technology ventures, securities offerings, cryptocurrency matters, real estate transactions, oil and gas…

Throughout his career, Mr. Thayer has been heavily involved in the formation, financing, and operation of business enterprises in a variety of industries both domestically and internationally.  His industry experience includes technology ventures, securities offerings, cryptocurrency matters, real estate transactions, oil and gas offerings, manufacturing businesses, retail establishments, franchised businesses concepts, resort development, brokerage businesses, professional sports team acquisition, and other start-up and emerging businesses.  He has also worked with large family offices with respect to their international holdings, including offshore trusts, international companies, and the complex tax issues that go with those structures.