Do This, Not That
The do's and don'ts of using your PPP loan funds
Now that you've taken the first steps toward getting your Paycheck Protection Program loan funds, Texas Citizens Bank is here to help you stay on track by sharing important do's and don'ts about how to use them.
The staff of Texas Citizens Bank, you might recall, worked overtime in April to process $97 million in PPP loans, helping nearly 500 small Houston businesses avoid layoffs or closing their doors completely.
So you would be wise to heed their advice — even the Houston SBA District Office is using these PPP guidelines to help small businesses make the most of their loans.
DO: Use the funds for payroll and authorized expenses only
Your PPP loan is to be used for payroll costs, group healthcare expenses, and other authorized costs, such as your business mortgage expenses or rent, utilities, and interest payments on other debt.
DON'T: Use the funds for other things
Make sure you use your loan only to pay for authorized expenses. You should expect to be audited by the bank or government officials. By avoiding misuse of the funds, your loan may be fully forgivable.
DO: Be organized
Keep records of how you use your loan funds. Opening and using a separate deposit account for the PPP loan funds can make this easy and streamline any auditing process. Contact a TCB banker to find out more about business deposit accounts.
DON'T: Mix loan funds with personal assets
Again, to keep things easy to track, avoid depositing your PPP loan funds into a personal account and avoid the temptation of using the funds to pay for personal expenses.
DO: Keep the rules in mind
Remember that your PPP funds need to be used immediately for authorized costs incurred during the eight weeks immediately following the loan's origination. Also, at least 75 percent of the forgiven amounts must be used for payroll expenses during that time.
DON'T: Attempt to cheat
Unscrupulous borrowers may try to take advantage of the law's gray areas, but please don't. Again, the bank or representative from the government is likely to perform an audit. The last thing you want is to be caught in an act of fraudulent use of funds.
If you would like to download these PPP loan fund do's and don'ts as a PDF checklist, you can do so here.