The Do’s and Don’ts of Getting, Using a Paycheck Protection Program Loan

Best practices that can help small businesses owners get their PPP loan funded and forgiven.
Kelsey Sheehy
By Kelsey Sheehy 
Edited by Sally Lauckner

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The devil is in the details for small-business owners seeking funding from the Paycheck Protection Program.

A missing signature can derail your PPP loan application for days or even weeks, delaying desperately needed financial help. And disorganized record-keeping can lead to headaches when you apply for forgiveness and you have to show how each and every dollar of your PPP loan was spent.

Applying the following best practices can help small-business owners get their loan funded and forgiven with relative ease.


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Do: Gather your documents in advance

A little legwork can go a long way when applying for a PPP loan. Read up on the program to understand who qualifies and how to apply. Then, pull together all of the necessary paperwork.

At a minimum, you’ll need payroll documents and tax statements. Bank statements, receipts, purchase orders and canceled checks may also be required. Keep everything together so you can easily access it at your lender's request.

"Most people learn the hard way that an ounce of preparation is worth hours on the back end," says Edward Barry, CEO of Capital Bank N.A. in Maryland. "Understand what you need and get it well organized."

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Don't: Skip the signatures

A missing signature can delay your application days or even weeks. So triple check that every statement and document is signed before submitting your paperwork.

"We see it all the time," Barry says. "People forget to sign something and it sets them back to the beginning. They essentially lose their place in line."

Do: Keep separate bank accounts and consider getting a second business bank account for a PPP loan

Commingling business and personal expenses generally isn't a good practice. And it can really muddy the water when you apply for a PPP loan, says Ken Alozie, managing director of Greenwood Financial Advisors in Washington, D.C.

A bank statement from an established small-business checking account can easily show that your company was in operation on Feb. 15, 2020, which you need to show to qualify for a PPP loan. If your business runs through your personal checking account, it’s harder to prove, Alozie says.

Beyond that, Barry recommends opening a second business checking account specifically for your PPP funds. That way you can easily show how the money was used when it's time to apply for forgiveness.

Don't: Spend your PPP money on ineligible expenses

Your PPP loan essentially becomes a grant, provided you use the proceeds as outlined by the Small Business Administration. That means using the bulk of your funds (at least 60%) on payroll costs, such as salaries, hourly wages, paid sick leave and group insurance benefits.

The other 40% of your loan can now be used on a broader range of expenses, including operating expenses, health and safety modifications and certain supplier costs.

Failure to meet the SBA’s loan forgiveness requirements means that you could have to repay a portion of your loan.

Do: Apply with more than one lender

You don’t want to spam lenders with loan applications, but you do want to have a Plan B and Plan C in case a lender rejects your application.

Alozie recommends working with a lender you know. If that’s not an option, look for lenders accepting PPP applications from new clients (many banks prioritized existing customers in past rounds).

Accepting multiple PPP loans will land you in hot water fast, so withdraw any applications with other lenders as soon as you're approved for a PPP loan.

Don't: Go it alone

Completing your PPP loan application can be a heavy lift, especially for businesses that have a few dozen employees. Lean on your accountant or bookkeeper, if you have one, to pull the reports needed to apply.

You can also contact your local Small Business Development Center or SCORE, a nonprofit that coaches business owners.

"You definitely want to find a partner who is knowledgeable and can help you navigate the process," says Alozie, who is a certified mentor with SCORE.

Do: Build a relationship with your lender

You want more than a transactional relationship with your bank. You want a contact who knows you and your business. Then, when you need help (like when you’re applying for a PPP loan) you’re not just a faceless request.

"Part of what you want to do as a small-business owner is build relationships with people you’ll need before you need them," Alozie says.