As small businesses in the Santa Clarita Valley begin to receive funds from the Paycheck Protection Program authorized under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, questions have arisen regarding what exactly this money can be spent on.

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With the passage of the CARES Act last month, businesses were able to file for loans authorized by the Paycheck Protection Program (PPP) that lend up to 250 percent of their average monthly payroll costs.

Under the PPP, small business owners applied for the loan with a bank, who then either approved or denied that loan. The U.S. Treasury Department is then set to essentially forgive the debt, allocating billions of dollars to pay the banks back the loaned out money in June.

Now, many small businesses in the Santa Clarita Valley have begun receiving funds from their PPP loans. However, some business owners have questions about what exactly they can use that money for.

See Related: How Local Banks Are Impacted By The CARES Act’s Small Business Paycheck Protection Loans

If business owners wish to have their loans forgiven, they essentially have to keep two numbers in mind: 75 and 25.

The first number, 75, refers to the total percentage of the loan that can be used for payroll-related costs. This means a minimum of 75 percent of the loan has to be spent on payroll-related costs, according to officials from Mission Valley Bank. 

The following graphic illustrates what is considered an “acceptable” payroll cost, and what is not considered an acceptable payroll cost:

See Related: Mission Valley Bank Answers Questions About Paycheck Protection Program Loans

The second number, 25, refers to the total percentage of the loan that can be used for non payroll-related costs. Any amount of the loan spent over the 25 percent mark for non-payroll costs will not be forgiven, according to officials from Mission Valley Bank. 

The following graphic illustrates what is considered an “acceptable” non-payroll cost, and what is not considered an acceptable non-payroll cost:

For more information, contact Mission Valley Bank by clicking here.

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