The Impact on PPP Loans and Unemployment Benefits

Monday, April 8, 2024 16:24 Posted by Admin

The COVID-19 pandemic has not been kind for a lot of companies, and small businesses, in particular, have struggled to stay afloat. To come to their help, the US Government has provided special relief programs designed to support certain businesses during these difficult times, like PPP loans.

If you’ve received such a loan, here’s how it impacts unemployment benefits.

How Do PPP Loans Work?

The Paycheck Protection Program (PPP) was first established under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) as a way to provide support to small businesses and organizations during the COVID-19 pandemic. Application for the loans ended on May 28, 2021, as the funds were officially exhausted.

The program allows borrowers to get loans that can help them cover payroll expenses for the most part, though there are some other eligible expenses stipulated in the loan agreements as well:

  • Rent
  • Mortgage interest
  • Utility bills, etc.

Through this loan program, many eligible businesses were essentially able to continue to provide wages for their employees and keep their businesses running during the pandemic. One of the most important details for PPP loans is that they do not have to be repaid if the company applies for forgiveness (and if the funds were used only for eligible expenses).

Does PPP Affect Unemployment?

Yes. While workers can benefit from both, employees cannot receive their wages paid through a PPP loan and unemployment benefits at the same time. This is because, under the CARES ACT, the funds for PPP loans were specifically allocated to prevent businesses from having to lay off their staff.

If a company received a PPP loan, it will have to report such funds to its state’s unemployment agency, at which point the company is no longer eligible for unemployment benefits.

However, after the company spends all the funds on their PPP loan, they can be eligible for unemployment benefits once again, under certain circumstances.

Is It Possible to Receive Both?

In certain cases, yes, but it’s advisable to be careful as to how you spend the PPP funds. For example, small business owners cannot use the funds for the PPP loans to cover their own compensation while receiving unemployment benefits at the same time.

They can, however, rely on unemployment benefits and use the PPP funds to cover other eligible expenses, such as the wages of their other workers, rent, utilities. However, at least 60$ of the funds must be used for payroll costs, as this is the principal purpose of this line of credit.

How does loan forgiveness work?

If you have applied for PPP loans, to receive forgiveness you will have to submit an application to the Small Business Administration (SBA) or the lender who provided you the loan.

To receive forgiveness, you will have to provide the SBA or the lender with some information, such as:

  • The number of employees you were able to keep on your payroll thanks to the loan;
  • Payroll costs;
  • Evidence that you complied with the PPP loan requirements;
  • Non-payroll eligible costs;

Once the application is completed, you can submit it either through the SBA forgiveness portal or to your own lender.

To be eligible for forgiveness, the SBA has established some criteria, both for First Draw and Second Draw loans:

  • Employee and compensation levels were maintained;
  • The funds were spent only for payroll and other eligible costs;
  • A minimum of 60% of the funds were used for payroll expenses;

Do You Need Help with Your PPP Loan Forgiveness Application?

If you’ve received PPP funds and are now looking to apply for forgiveness, Taylor Benefits Insurance Agency can help you navigate this process and compile everything your application needs.

Additionally, as an independent broker, we may also assist you in building a cost-effective employee benefits package that will help your business remain competitive, motivate your employees, and provide them with the right support they need.

To learn more about us and how we can help, please call our team at 800-903-6066 to get a free, no commitment proposal.

Written by Todd Taylor

Todd Taylor

Todd Taylor oversees most of the marketing and client administration for the agency with help of an incredible team. Todd is a seasoned benefits insurance broker with over 35 years of industry experience. As the Founder and CEO of Taylor Benefits Insurance Agency, Inc., he provides strategic consultations and high-quality support to ensure his clients’ competitive position in the market.

We’re ready to help! Call today: 800-903-6066