There are more expenses that qualify as 'utilities' under PPP regulations than you think. An employee benefits attorney breaks down what you can spend the money on.
Jennifer Berman is an employee benefits attorney for MZQ Consulting and Kelly Benefit Strategies. She says that many business owners may fear applying for the PPP loan now in light of confusing guidelines. But it could be a huge lifeline for entrepreneurs, especially in terms of covering utilities. Under the PPP guidelines, utilities consist of the usual suspects: electric, gas, water, and phone and internet service. But mileage on a company car and cell phone bills can also count if these utility services have been in place before February 15, 2020 and were claimed on last year's taxes. Janitorial expenses and cloud-based storage expenses don't count as utilities, however. Visit Business Insider's homepage for more stories.
As an employee benefits attorney and consultant, I've helped a variety of small businesses use the Paycheck Protection Program (PPP) to their advantage. For farms, manufacturers, professional services, health providers, restaurants, and more, the PPP can be a lifeline during the coronavirus pandemic.
But just like our response to the virus itself, many are still learning the ins and outs of the PPP. While new changes have added flexibility, there are still more expenditures that may qualify for reimbursement than you'd think. Utilities are forgivable — here's what falls under that category One unique aspect of the PPP is its approach to what's considered a "utility." Under new PPP rules, these expenses, along with rent and mortgage interest, are now forgivable for up to 40% of the loan. In addition to traditional utilities like electric, gas, water, and phone and internet service, mileage on a company car and cell phone bills may be considered utility expenses under certain circumstances. Of course, not everything is a utility. I've faced questions about fees for cloud-based storage, janitorial expenses, even inventory — no, these are not utilities, no matter how much we may suddenly wish they were. To qualify for PPP loan forgiveness, these utility services must have been in place before February 15, 2020. For transportation utilities (like fuel for the use of a business vehicle) to be eligible for forgiveness, they should have been claimed on last year's taxes. For example, if in 2018 you used a company car and deducted the appropriate mileage or depreciation on your taxes, you can choose to allocate PPP loan dollars to that expense (which would have been tax deductible this year) and be eligible for forgiveness. Take advantage of the PPP while it's still available, and make sure you cover your tracks Of course, now that Congress has extended the PPP spending timelines from eight to 24 weeks, small businesses have much more time to expend funds on payroll and may not be as focused on ensuring other expenses are covered. Still, business owners, especially those with fewer employees, should be cognizant of additional ways to maximize their PPP loans and ensure every dollar is covered. The best way to plan for this uncertainty is for businesses to play it safe — use the money now in ways that provide the most options to ensure it's covered later. My advice: Sit down, dig in, and digest the many terms and conditions that must be met for loans to be forgiven — it's more than you may realize. Know the rules, but also know that they're evolving. Remember, this is a very nascent program. Never before has the Small Business Administration (SBA), or our banks and financial institutions, been tasked with distributing this much money ($670 billion) to all types of small businesses in just a few weeks. Since the process is admittedly exceedingly (and at times, unnecessarily) complex, it's also imperative that you document everything diligently and in detail. Get a strong start on "audit-proofing" your PPP loan by establishing a clean and organized paper trail throughout the process. That means keeping PPP funds in a separate bank account and retaining all relevant documentation of covered expenses (i.e., payroll, rent obligations, utility payments, and mortgage interest). Embracing best practices early on can help ensure accountability, expedite loan forgiveness, and protect against potential questions. Finally, don't be scared away. Today, more than $100 billion is still on the table. However, demand for PPP has declined significantly as more businesses fear getting burned by confusing rules and deadlines. Following an initial rush of applicants and approvals in the first round, the volume of loan approvals in the second round dropped nearly 85% last month. This crisis has impacted nearly every industry sector and every small business. PPP can help most of them, albeit some more than others. It's not a perfect program, and it may not be easy, but the financial support it offers is real. If navigated carefully and used wisely, PPP just might make the difference between a temporary closure and a permanent one. SEE ALSO: One invoice financing platform is using blockchain to give business owners a safe and sustainable alternative to the PPP loan — here's how it works Join the conversation about this story » NOW WATCH: We tested a machine that brews beer at the push of a button
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A man attempted to steal $6 million in PPP loans after submitting applications for companies with names from 'Game of Thrones': report
Summary List Placement A North Carolina man was charged after reportedly trying to steal over $6...Summary List Placement A North Carolina man was charged after reportedly trying to steal over $6 million in Paycheck Protection Program (PPP) loans for companies with names from "Game of Thrones." Tristan Bishop Pan, 38, was charged with wire fraud, bank fraud, and engaging in unlawful monetary transactions on September 29 after submitting applications for companies named White Walker, Khaleesi, and The Night's Watch (all references to the popular HBO show), according to the Department of Justice. "Pan made false statements about the companies' employees and payroll expenses," according to the DOJ. "The PPP loan applications were supported by fake documents, including falsified tax filings, according to the indictment." He reportedly submitted 14 PPP loan applications over $6.1 million, and he received more than $1.7 million in benefits after being approved for two applications. The government seized some of the allegedly fraudulent loan benefits, according to the DOJ. In April, the US government launched the PPP as a way to help small businesses financially amid the pandemic. These loans must be used for payroll costs, rent, and utilities. The US Small Business Administration guarantees PPP loans under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, and they released the names of hundreds of thousands of small businesses that received funding from the PPP in July. The CARES Act was built to provide emergency financial assistance to Americans who are suffering economically from the coronavirus pandemic. But the program has been under scrutiny over the possibility of fraud. In July, some banks filed a record-high number of claims of suspected business-loan fraud, according to a report from The Project on Government Oversight. The report analyzed previously unreported government data to the Treasury Department, stating that they are uncertain that there has been "minimal fraud in the Paycheck Protection Program" the report said. Several other people have reportedly submitted fake applications. Recently, a prominent Hawaii defense contractor was charged with bank fraud and money laundering for stealing more than $12.8 million in PPP loans, as Join the conversation about this story » NOW WATCH: Inside London during COVID-19 lockdown
A revamped PPP coronavirus loan program is in the works. Will it help small businesses left out before?
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