Small businesses in California may benefit from Paycheck Protection Program (PPP) loans or Economic Injury Disaster Loans (EIDL) to cover necessary operating expenses if they qualify. These loans can be beneficial for businesses that are facing economic challenges. It’s important to note that they will need to maintain up-to-date bookkeeping and tracking of expenses. If you’re a small business owner in Sacramento who is seeking help with bookkeeping and tracking of your PPP and EIDL loans, know that you can use the accounting services of Sacramento PPP and EIDL bookkeeping and tracking accountants from Cook CPA Group.
The Sacramento accountants
from Cook CPA Group are available to help small businesses in nearly every industry manage their loans.
How Small Businesses Can Benefit From PPP Loans and EIDL Loans
PPP loans and EIDL loans are two resources that small businesses can turn to for financial help as they face hardship as a result of COVID-19. While both are available to small businesses, each has a different purpose, benefits, and forgiveness conditions. Small businesses should note that it is possible to apply and qualify for both EIDL and PPP loans, but each should be used for different expenses. Small businesses can’t, for example, use both EIDL loans and PPP loans to cover payroll. Small businesses must provide documentation of how the funds from each type of loan is used, which is relatively simple if they use the help of an accountant to maintain up-to-date bookkeeping records.
The Difference Between PPP Loans and EIDL Loans
Both loans can be helpful to small businesses in need, but it’s important to note how each type of loan is different.
Economic Injury Disaster Loans (EIDL) Loans
EIDL loans have been available to small businesses for decades—they’ve traditionally been used to help small businesses that are impacted by natural disasters. Small businesses negatively affected by the pandemic can apply for these loans as well.
EIDL loans allow small businesses to borrow up to $2 million for necessary operating expenses. This loan has an interest rate of 3.75%, which has a repayment period of up to 30 years. Repayment may be deferred for up to one year following the disbursement of the loan. The funds received through this loan can be used only for necessary expenses, which includes payroll, supplies and materials, and mortgage and rent payments. They cannot be used for employee bonuses and physical repairs and expansions.
Through an EIDL loan, businesses can receive an advance of up to $10,000, which does not need to be repaid. This advance should be used for immediate expenses while the business awaits the approval and disbursement of the remainder of their loan. Small businesses can get $1,000 for each employee included in their advance, which is capped at $10,000.
To qualify for an EIDL loan, small businesses must employ less than 500 people, be independently owned and operated, operate primarily within the U.S., and not be dominant in their field nationally.
Paycheck Protection Program (PPP) Loans
PPP loans were made available to small businesses in March of 2020 as part of the CARES Act. They provide financial assistance to small businesses that are facing economic hardship following the onset of COVID-19.
Small businesses can qualify for PPP loans if they employ no more than 500 people and are negatively impacted by the novel coronavirus. The funds obtained through a PPP loan must be used primarily for employee payroll and benefits. Independent contractors and sole proprietors can use PPP loans to pay for their own payroll costs. Employee payroll costs for both small businesses and independent contractors/sole proprietors cannot exceed $100,000 on an annualized basis. PPP loans can be forgiven if the sole proprietor/independent contractor or small business meets specific requirements.
How An Accountant Can Help Your Small Business with PPP and EIDL Loan Bookkeeping and Tracking
Small businesses must spend the funds they receive through PPP loans and EIDL loans properly, or else they risk a potential audit and other legal and financial consequences. Small businesses can use the help of an experienced accountant to maintain accurate and up-to-date bookkeeping to make sure that they are spending their PPP loan and EIDL loan funds in the right way.
You will need to provide a specific set of information about your small business to apply for EIDL and PPP loans. EIDL loan applications require information about a small business’s gross revenue during the prior 12 months, which you can compile with the help of an accountant. PPP loan applications require payroll records, among others, depending on the lending institution’s requirements. Use the help of an accountant to gather and organize your application records today.
Qualifying for PPP loan forgiveness means showing that the funds received through the loan were spent according to the Small Business Administration’s guidelines. Use the help of an accountant not only to perform accurate bookkeeping of your loans but also to reduce the risk of audits and other potential complications.
Sacramento Accountant for Bookkeeping PPP and EIDL Loans
PPP loans and EIDL loans can allow businesses to continue to operate as they face economic uncertainty. If you’re a small business owner who has received PPP or EIDL loan funds, allow an accountant to do your bookkeeping and tracking for you so you can focus on your day-to-day operations.