06 May Documentation for PPP Loan Expenditures
As of now, it is unclear what specific documentation will be required when you approach your bank to request forgiveness of your PPP loan. Unless the SBA follows up with more guidance, individual banks could have different standards when it comes to documentation required for forgiveness. This memo includes our recommendations of best practices regarding documentation of expenditures to help put you in a position to have your loan forgiven.
Maintain a file that includes third-party documentation supporting each payment made towards qualified PPP expenditures
For example: payroll reports, utility invoices and loan remittance requests. In addition to the third-party documentation, we recommend keeping a copy of your bank statement showing the payment clearing your bank account.
Some expenses, such as utilities, are very straight forward. You can use PPP money for the entire payment, so just keep a copy of the invoice and highlight the total amount due.
For other payments, such as payroll and debt, a reconciliation will have to be performed between the total payment on the third-party documentation and the amount that is ultimately allowable for PPP forgiveness. Make notations on the third-party documentation of such reconciliation.
If you do not receive a third-party remittance for each monthly rent payment, make a copy of the lease agreement and request that your landlord send you acknowledgement confirming the receipt of your payment.
Consider using a separate bank account for PPP proceeds
Deposit the PPP proceeds into a separate bank account but continue to pay your payroll and other allowable expenses out of your operating account.
Each time you make a payment out of your operating account for payroll, utilities, rent or a loan, transfer money from the PPP bank account into the operating account to reimburse the operating account with PPP money. Each time you make a transfer from the PPP bank account to replenish the operating account, create a ‘transfer request’ that includes the third-party documentation previously discussed.
Short of establishing a new bank account, consider using a money market account that has limited activity. Or many accounting packages allow you to create a separate bank account on the general ledger (sub-account) without creating a separate physical bank account.
The goal should be to hand your bank a very organized package that shows the amount of money borrowed and a list of each qualified payment with third-party documentation that supports each amount on the list.
Adapted from PSK April 29 email to clients. Please contact PSK at (817) 664-3000 regarding other considerations related to PPP loan forgiveness, such as maintaining employee head counts and salary levels.