Skip to content

How I’m Handling PPP Funds

Unless you’re hiding under a rock somewhere, you know that the CARES act provided stimulus funding for many different people and organizations. I’m not going to go into the politics of this, or whether I think it was a good idea. I won’t even mention how much this will cost us down the road when we have to pay it back. It’s a done deal at this point, so now we have to work the system.

The CARES act included funding through a program called the Payroll Protection Program, the PPP.

My wife got tired of hearing me say PPP. Apparently it sounds sophomoric. Maybe it was just the sophmoric way I said it. So now I call it the 3P loan.

When working with the 3P funds, I call it 3P Operations. Or 3PO.

I hope you liked my Star Wars droid joke.

Applying for and obtaining a 3P loan is not what this post is about. Many have already done it. As of this writing, a second round of funding has been approved. If you’re about to apply, buckle up. It’s more complicated than you’d expect. Lean on your community banker. Try Franklin Savings Bank. They’re a great help.

What we need to discuss is how to handle these funds once you have them. Of critical importance is proving the forgiveness benefit of the program. Remember, the 3P funds are a loan. You’ll need to pay back every bit that isn’t forgiven.

I have no intention of taking a loan from the government. But I will take as much of my tax money back as possible. That’s what the forgivable portion of the 3P loan is. It’s a grant. It’s a tax return.

No one is going to just take your word for it that you spent the funds on forgivable expenses: payroll, rent, utilities, and mortgage interest. You will need to prove it. You may be audited. This is not a game. So, I urge you to take steps to prepare.

Caveat: I am not an accountant or an IRS agent. I urge you to talk to your accountant. I am, however, a business owner trying to navigate these murky waters as best I can with an absence of SBA instruction. My method might change if I get better information, but until then, here’s what I’m doing.

Step 1: Leave the 3P funds in a separate account. I did not dump the 3P funds into my business checking account. I keep these 3P funds in a separate savings account. Only the 3P funds are in there.

Step 2: Track forgivable expenses. As I spend money out of my business checking account during normal operations, I track forgivable expenses. I do this additional to my checkbook register in a separate spreadsheet. As these expenses add up, the spreadsheet talley’s the total forgiven amount.

Step 3: Paperwork. Copy and stash every receipt, paid bill, and cancelled check from forgivable expenses. Keep it in a 3P folder to back up your spreadsheet.

Step 4: Transfers. Weekly, I transfer the forgivable amount from the 3P account to my checking account. Only at that point can I use it.

Step 5: Taxes. Uncle Sam needs his due. While the 3P loan is not considered taxable income, the forgivable expenses are not considered business expenses. That results in a higher tax burden. Here’s how it works:

When your business has revenue, you’re not taxed on that. You’re taxed on profit, which is revenue – legit business expenses. Revenue – expenses = taxable profit.

The 3P funds are not revenue, so they’re not taxed. The government made a big deal about that. This is tax free money. So we were told.

But the forgivable expenses are not business expenses because you didn’t pay for them. As such, your legit business expenses just went down by the amount of the 3P loan forgiven. Lower business expenses means higher taxable profit. Revenue – lower business expenses = higher taxable profit.

Taxed again.

I don’t want to get surprised by the IRS next April. So I am preparing for this by taking 30% of each 3P transfer and moving that to my Tax Savings Account.

All this is based on best information currently available and may not be correct in coming months. But if it stays this way, then I’m prepared. If the government decides to make forgivable expenses into legit business expenses, then the tax savings is mine to use.

That’s it. Tracking, paperwork, transfer, and taxes. Each week I get a plug of cash into our business checking account which helps my business during this difficult time, which is exactly the intention of the program.

The program has all sorts of other caveats, including salary reduction restrictions and headcount requirements. Be sure to meet those and any other restrictions included in the program or the government adds at a whim. Pretty much every law firm has put out informationals on this.

If I use all my 3P loan amount on forgivable expenses, then sweet. It was all a grant. If I don’t spend all of the 3P loan on forgivable expenses, then I’ll do these two things with the leftover.

Ending 1. Employee Bonuses. It appears to be possible to give staff a bonus, which they so richly deserve during this crisis. So far, it appears that this is payroll and forgivable. It seems to meet the intent of the CARES act as well by getting funds into the local economies.

Ending 2. If there’s any funds left, I have no intention of keeping them. I don’t want a loan, even at 1% interest. By keeping the funds in a separate account, what is not forgiven is ready to be used to pay off the remaining loan in one shot.

Lastly, I’m being extra careful. I have trouble trusting that the rules won’t change. I have trouble trusting that the SBA or IRS won’t change the forgiveness criteria. So, some of the 3P funds will stay in my Tank account until I know for sure the forgiveness amount is right.

I’m not convinced that these stimulus programs are worth it. I am convinced they’re not worth the additional national debt. But, it’s here and a way to retreive taxes. Just be careful.

Wondering what a Tank account is? Then let me encourage you to read Buying Bacon: Practical Finances for Small Business Owners. Find more information at

Knowledge allows belief. Belief builds hope. Hope defeats fear.

One thought on “How I’m Handling PPP Funds Leave a comment

  1. Bob~

    Very interesting Blog. What we (me too) do without the Excel spreadsheet. I find so many uses for it. Congrats on receiving the 3PO grant/loan and Hooray to you on how to manage it. Above all a big Thank you for explaining in very sequential terms how to keep track of the funds while spending the money. Great job!

Leave a Reply

%d bloggers like this: