Yes. The PPP loan can be used to recruit new staff for your business. Borrowers can recruit new workers to keep their full-time employee headcount, according to the SBA. The PPP loan application, as well as the PPP forgiveness application, makes no distinction between new and old workers on the payroll.
Aside from that, borrowers are expected to keep the same amount of full-time workers on the payroll all through their loan forgiveness period as they did during one of their reference periods.
Note that upwards of 4.9 million borrowers have been supported for a Paycheck Protection Program (PPP) loan as of 2021. Remember that these loans are intended to assist small business owners and other authorized companies in keeping workers on the wage bill and away from the unemployment office, as well as to support specific business expenses.
There are two options for your PPP loan: dedicate it to officially approved expenditures or repay it to your lending institution.
You cannot use PPP funds for expenses that are not listed as allowed. According to SBA regulations, “at least 60% of the PPP borrowed funds must be utilized for payroll costs.” This demonstrates the rule maker’s eagerness for business owners to use PPP loans to safeguard jobs.
If you use PPP funds for unauthorized uses, the SBA will order you to reimburse those cash. If you’re using the cash intentionally for unlawful purposes, you will be facing fraud charges. When one of your owners, employees, or partners misuses PPP funds, the SBA still has the right to appeal against the owner, person, or partner for the misuse.
What Are Forgivable Expenses And How Can PPP Loans Be Used?
PPP loans are to be utilized for the following purposes:
- Payroll expenses (as described in the CARES Act, the Economic Aid Act, and this provisional final rule)
- Expenses pertaining to the furtherance of group health care, life, impairment, sight, or dental perks all through durations of paid sick, clinical, or family leave, and group health care, life, impairment, vision, or dental insurance premiums
- Mortgage interest payments (but not mortgage prepayments or principal payments)
- Rent payments
- Utility payments
- Interest payments on any additional debt
- Interest payments on any other debt.
- Covered operational costs (payments made from any business software or cloud computing service that helps to guarantee smooth business operations, product or service delivery, the processing, payment, or tracking of payroll expenses, human resources, sales and billing functions, or accounting or tracking of supplies, inventory, records, and expenses).
- Expenses that have to do with repairing property damage (costs that have to do with property damage and vandalism or looting owing to the social uprising that occurred in 2020 that are not covered by insurance or other compensation).
- Covered vendor cost (expenses made by a borrower to a vendor for the supply of merchandise that are necessary to the borrower’s activities at the time the expenditure is made.
- Payments that are made in accordance with a contract, order, or purchase order.
- Amount paid prior to or during the covered period with regard to the relevant covered loan; or, in the case of perishable items, payment made prior to or during the covered period with regard to the applicable covered loan); and covered worker protection expenses
- Operating or capital expenditures to enable the adjustment of a corporation’s operations to conform with standards given or direction approved by the Department of Health and Human Services, the Centers for Disease Control, the Occupational Safety and Health Administration, or any comparable criteria formed or assistance approved by a State or local government, all through the period beginning March 1, 2020, and ending the date on which the national emergency with regards to the COVID-19 emergency expires attributable to the upkeep of standards of hygiene, social distancing, or any additional worker or client safe operation prerequisite; such expenses may also include: the acquisition, upkeep, or remodeling of assets that generate or broaden a drive-through window facility; an interior, open – air, or combined air or air pressure ventilation or filtration system; a physical barrier including a sneeze guard; an expansion
- Covered materials as defined in title 44, Code of Federal Regulations, section 328.103(a), or any erstwhile rules
- Particulate filtering facepiece respirators endorsed by the National Institute for Occupational Safety and Health, such as those endorsed only for emergency use authorization; or other types of personal protective equipment as defined by the Administrator in deliberation with the Secretaries of Health and Human Services and Labor; and those expenses do not consist of residential real estate or intangible property.
It should be noted that at least 60% of the PPP borrowed funds must be immersed in payroll costs. The portion of any EIDL repaid would be included in calculating the percentage of funds used for employee wages. In order to measure the amount of loan forgiveness, the borrower will need to record the funds used for employee wages.
Although the Act allows PPP loan funds to be applied to the activities noted above as well as other permitted uses specified in section 7(a) of the Small Business Act (15 U.S.C. 636(a), it is most often believed that limited appropriations and the configuration of the Act warrant potential borrowers to use a significant proportion of the loan proceeds for employee wages.
This portion is accurate with the Flexibility Act’s restriction on the forgiveness amount. This restriction over the use of loan funds will assist in ensuring that the limited funds provided for these loans are aimed directly toward salary protection since each loan authorized reduces the appropriation, irrespective of whether parts of the loan are afterward forgiven.
Conclusion
If you utilize the funds as the Small Business Administration specifies, your PPP loan would become a grant. That implies allocating at least 60% of your budget to salary costs including salaries, hourly pay, paid sick leave, and group insurance benefits.
The remaining 40% of your loan could now be put toward a wider variety of expenses, such as operational costs, health and security upgrades, and even certain supplier costs. If you do not fulfill the SBA’s loan forgiveness requirements, you may be required to repay a fraction of your loan.