Accounting for PPP Loans and Forgiveness

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed by President Trump to help keep small businesses afloat amid the mandated COVID-19 related closures. The CARES Act included a Paycheck Protection Program (PPP), which initially authorized up to $349 billion of federally guaranteed loans to qualified small businesses. That amount was subsequently increased to $659 billion.

The PPP loan gave businesses access to capital when other liquidity and financing options were unavailable. An enormous benefit to the PPP loan is that it may be forgiven if the borrower spends the proceeds on eligible expenses, meets certain other criteria, and applies for forgiveness. Unforgiven amounts turn into two or five year loans at 1% annual interest rate. As a debt instrument that has characteristics of debt and a government grant, businesses should take considerable care and carefully adhere to the criteria requirements. These criteria requirements… Continue here

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