What Can You Spend Your PPP Forgivable Loan on?

If your small businesses managed to secure a Paycheck Protection Program (PPP) loan before the well ran dry, your next task is figuring out how to use it. Here’s a list of the expenses that qualify for forgiveness (meaning you don’t have to pay the loan back).

Remember, your lender will perform an audit at the end of the 8-week forgiveness period to see how you spent the loan. Be sure to keep the relevant paperwork we list under each section, so you can sail through the audit.

Salaries & Wages

A minimum of 75% of your PPP loan must go to compensating your employees, excluding those who earn more than $100,000 per year. We are still waiting for guidance from the Small Business Administration on salaries over $100,000 and business owner/family salaries.

For the audit: Payroll processing reports, tax reports, or other reports such as paid time off (vacation or sick leave).

Healthcare Benefits

This is for paying any premiums due to the company’s group health insurance plan. Company owners and family are included if they’re on the group plan. However, it appears that payments to the owner’s policy or Health Savings Account contributions do not qualify for PPP loan forgiveness.

For the audit: Insurance invoice(s) and proof of payment.

Retirement Plan Contributions

If you offer your employees a Defined Benefit Plan, Defined Contribution Plan, or SEP IRA, you can use some of your PPP loans to continue funding that plan. There’s no specific guidance about benefits paid to the owner or owner’s family, but we doubt that it would be forgiven.

For the audit: Retirement plan statements, funding schedules, and proof of remittances.

Non-Payroll Expenses

Operating expenses that don’t directly benefit employees — a few of which we’ll list below — can’t total more than 25% of the loan. If you go over that percentage, you’ll have to pay back any excess amounts.


To be forgiven, the expense must be both incurred and paid during the 8-week loan period. Any rent that was already due before the date of the loan doesn’t qualify. Also, the lease must have been signed before February 15, 2020.

For the audit: Signed lease contract, proof of rent payment (canceled check, ACH, bank statement, or wire).


This covers electricity, gas, water, phone, internet, etc. It’s not clear what the SBA means by “etc.” Service contract agreements must have been in effect before February 15, 2020.

For the audit: Proof of payment for each utility.

Interest on Business Loans

You may use some of your PPP loans to pay the interest on your business mortgage, practice acquisition loan, a build-out loan, or any loan secured by business personal property. The mortgage/loan must have been in effect before February 15, 2020.

For the audit: Bank statement or loan invoice showing principal and interest, plus proof of payment. You may wish to pay principal and interest separately during the 8-week PPP loan period so there’s no question in the auditor’s mind.


The pandemic has inflicted major damage on many of America’s small businesses. And the financial relief red tape makes the situation even more difficult. Xendoo can help make sense of it all and take some of the bookkeeping worries off your shoulders, so you can focus on getting back to the “new normal.” See for yourself what a difference we make with a one-month free trial.


This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.


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