Sage can give you the most advanced and latest tool. It can support you with the latest information and security for your business. In today’s article, we are going to talk about the “setting up of the PPP loan account“.
PPP loans are a much-needed lifeline for small businesses. The loans can be for 2.5-time payroll costs. , up to $10 million and features with the enriched and streamline the application process and fewer requirements.
This Paycheck Protection Program (PPP) is a loan program that is created for the Cares Act and was set up to encourage the business to maintain wages and salaries and pay rent and utilities during the COVID 19 crisis.
Where you can use PPP Loans?
Once the PPP Loan is with you, it can be used for below :
- Payroll costs, including benefits
- Interest on mortgage obligations, incurred before 15 February 2020
- Rent under a lease agreement in force before 15 February 2020
- Utilities for which services start before 15 February 2020
What includes payroll costs?
- For a sole proprietor independent contractor: income, commissions, wages, or net earnings from self-employment, capped at $100,000 on the annual basis for each employee
- Employee benefits such as family, medical, vacation, parental, severance, payment required for the group health benefit, including the insurance premium, etc
- State and local taxes
- Salary, wages, commissions, or tips( $100,000 cap on an annual basis for each employee
Coverage of 8 weeks
Also, eligible expenses are those which are covered under 8 weeks, from the first day, and the first payment was made by your lender. It is not important that the date on which you sign your agreement. Depending on your payroll schedule, you need to adjust the timings of payroll date to accommodate as may payroll cycles as possible.
At least 75% of the loan amount should be used for payroll costs.
You should maintain the number of employees on the payroll. Below is mentioned how you can calculate.
Initially determine the average number of full-time equivalent employees you had for
- The 8 weeks with an initial loan agreement (A)
- February 15, 2019, to 30 June 2019 (B1)
- and January 1, 2020, to February 29, 2020 (B2)
Take A and divide by B1, do the same thing with B2, pick the largest number you receive and if you are a seasonal employer you should divide it by (B1).
If you receive the number equal to or larger than 1 it means you have successfully maintained your employees and you meet this requirement and if you receive the number smaller than 1, it means you didn’t maintain your headcount.
Set up the Loan Account
It is always recommendable to create a separate cash account, both in Sage 50 and at the bank, to deposit the loan proceeds and track the related COVID 19 expenditures. A separate account is more audit friendly and it creates a clear audit trail. This will help in maximum loan forgiveness.
1️⃣ Create a new account for tracking the loan
- Open a bank account and deposit the loan amount. After that set up the cash account in sage 50.
- Create a new liability account, it should be tracked as a liability until you know how much loan will be forgiven
2️⃣ Set up the loan vendor
Set up the PPP lending institution as a new vendor and enter the loan liability account as the default expense account.
3️⃣ Record Receipts of the loan proceeds
After receiving the money, submit it to your new bank account and record the transaction in Sage 50 using the receive money window.
How to contact
For more information Sage 50 experts are available 24*7 to support you with the latest information and help you to solve your all the Sage related problems. Sage experts are professional, polite, and having many years of experience in the same domain. You can also email and soon one of the Sage experts contacts you with the resolution.