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The Treasury will start forgiving PPP loans right away. Here's how to make sure you get the maximum amount back.

  • The SBA will begin forgiving PPP loans late this week or early next after banks and borrowers complained about the slow process.
  • Karen Mills, former head of the US Small Business Administration (SBA) and senior fellow at Harvard Business School, offered advice for getting the maximum amount forgiven from your PPP loans on an episode from Linkedln's webinar series "Business Unusual."
  • Using PPP loans for anything other than payroll costs, rent, or utility bills will ultimately reduce the amount of money forgiven, she said.
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The Small Business Administration will begin the process of forgiving Paycheck Protection Program loans this week or early next, a Treasury department spokesperson told the Wall Street Journal.

The SBA doled out $525 billion through the PPP, which provided forgivable loans and grants to small-business owners and independent contractors who retain workers during this international disruption. The Paycheck Protection Program covered mortgage interest, rent, and utility payments for small-business owners up to eight weeks after receiving the loan. Failing to maintain staff, payroll, or using these funds for anything other than the allowed expenses will reduce the amount of money forgiven.

The SBA opened its online portal for loan forgiveness applications in early August and received more than 96,000 applications — which represent about 2% of the 5.2 million loans — but none have been approved, according to the WSJ.

In a recent episode of Linkedln's webinar series "Business Unusual," Karen Mills, a senior fellow at Harvard Business School and a former head of the Small Business Administration, offered tips for maximizing the amount forgiven on your PPP loans. Mills said it is critical for leaders to prioritize what makes the most sense for the reopening of their business.

"One of the things to do right in this moment, besides going to get as much money as possible from all the programs, is to think about your business with a fresh eye," Mills said. "You should think about what customers are really profitable to you."

Mills also recommends using this time to identify the products your customers value. 

Maintaining your staff, wages, documenting your expenses, and keeping in contact with your bank are all tools for increasing the amount forgiven on your PPP loans, she said. 

Prove that you kept or rehired your employees

One of the main guidelines for PPP loan forgiveness is retaining staff. If you decreased the number of full-time employees in your business and didn't hire them back, less of your loan will be forgiven.

If you're a small-business owner who let your employees go, she recommends rehiring them for the company's long-term survival. If a founder reduced her number of full-time employees between February 15 and April 26, 2020, she will not suffer a forgiveness reduction as long as she restores the number of employees to the amount she she had before February 15, 2020 by December 31, 2020.

"Small businesses think of their employees like family," Mills said. "You want to make sure that they stay on the healthcare and that they stay employed rather than go to unemployment, which many have had to do."

Prove that you kept their wages up

Your loan forgiveness will also be reduced if you decreased salaries and wages by more than 25% for any employee that made less than $100,000 in 2019, according to a fact sheet by the US Department of Treasury. 

Similar to re-hiring, you must show payroll documentation to prove that you paid your employees, Mills said.

Show your receipts

No more than 25% of the forgiven amount may be for nonpayroll costs, notes the US Department of Treasury. According to Mills, it is especially important to keep track of the information you submit for payroll documentation. 

When you're filling out an application for the PPP loan, you should include documents that verify the number of full-time employees and pay rates, as well as the payments on a mortgage, lease, and utility bills.

Get back in touch with your lender

If you want your PPP loan to be forgiven you should first submit a request to the lender that is servicing the loan, according to the US Department of Treasury. The lender must make a decision on the forgiveness of the loan within 60 days.

Ultimately, all of these steps are not only important for keeping the lights on at your business but can help you reach a bigger goal in mind — reopening. 

"One of the hopes is that while we are going to talk about how to get this funding," she said. "We also should think about how are you going to change your business for the better for the future."

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