Several of our PPP borrowers have asked what expenses the PPP proceeds can be used to pay, and how the 75% / 25% rule works. Following is cut directly from the PPP Interim Final Rule dated 4-23-20 published SBA.
We've made it easy to access the full Interim Final Rule and a FAQ published by the U.S. Treasury Department.
How can PPP loans be used? The proceeds of a PPP loan are to be used for:
- Payroll costs (as defined in the Act and in 2.f.);
- Costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums;
- Mortgage interest payments (but not mortgage prepayments or principal payments);
- Rent payments;
- Utility payments;
- Interest payments on any other debt obligations that were incurred before February 15, 2020; and/or
- Refinancing an SBA EIDL loan made between January 31, 2020 and April 3, 2020.
If you received an SBA EIDL loan from January 31, 2020 through April 3, 2020, you can apply for a PPP loan. If your EIDL loan was not used for payroll costs, it does not affect your eligibility for a PPP loan. If your EIDL loan was used for payroll costs, your PPP loan must be used to refinance your EIDL loan. Proceeds from any advance up to $10,000 on the EIDL loan will be deducted from the loan forgiveness amount on the PPP loan.
However, at least 75 percent of the PPP loan proceeds shall be used for payroll costs. For purposes of determining the percentage of use of proceeds for payroll costs, the amount of any EIDL refinanced will be included. For purposes of loan forgiveness, however, the borrower will have to document the proceeds used for payroll costs in order to determine the amount of forgiveness.
Citizens Bank recommends that you consult your outside advisors and experts in all matters relating to the PPP and loan forgiveness. We will work to provide you timely and accurate information, but the burden for obtaining forgiveness rests on the borrower. All information provided in this format or any other communication regarding the program is believed to be accurate, but no guarantee is or can be made by any Citizens Bank representative.