Preparing For PPP Loan Forgiveness

Now that you have your PPP loan it's time to look at preparing for your "loan forgiveness". 

Some may think of their PPP loan as "free money" however there are guidelines that must be followed in order to receive full loan forgiveness.

On May 15, the SBA released the loan forgiveness application, which left banks and small business owners confused. A week later the SBA prepared additional comments for release in an attempt to provide additional guidance however there were still many unanswered questions for some borrowers. With over $511 billion out in PPP loans and 79% of those being loans under $100,000 there are bound to be a lot of questions for hard working American's trying to keep their small businesses open. 

We really appreciated Kyle Westaway's summary of the latest guidance on PPP loan forgiveness and think you will as well. This article provides information on what the bank will review in a forgiveness application and the timeline for the lender's decision on your forgiveness. 

One question that has come up time and time again, is what costs are eligible for forgiveness? Below are eligibility guidelines directly from the SBA forgiveness application

 Summary of Costs Eligible for Forgiveness: Borrowers are eligible for loan forgiveness for the following costs: 

1. Eligible payroll costs. Borrowers are generally eligible for forgiveness for the payroll costs paid and payroll costs incurred during the eight-week (56-day) Covered Period (or Alternative Payroll Covered Period) (“payroll costs”). Payroll costs are considered paid on the day that paychecks are distributed or the Borrower originates an ACH credit transaction. Payroll costs are considered incurred on the day that the employee’s pay is earned. Payroll costs incurred but not paid during the Borrower’s last pay period of the Covered Period (or Alternative Payroll Covered Period) are eligible for forgiveness if paid on or before the next regular payroll date. Otherwise, payroll costs must be paid during the Covered Period (or Alternative Payroll Covered Period). For each individual employee, the total amount of cash compensation eligible for forgiveness may not exceed an annual salary of $100,000, as prorated for the covered period. Count payroll costs that were both paid and incurred only once. For information on what qualifies as payroll costs, see Interim Final Rule on Paycheck Protection Program posted on April 2, 2020 (85 FR 20811).

 

 2. Eligible nonpayroll costs. Nonpayroll costs eligible for forgiveness consist of: (a) covered mortgage obligations: payments of interest (not including any prepayment or payment of principal) on any business mortgage obligation on real or personal property incurred before February 15, 2020 (“business mortgage interest payments”); (b) covered rent obligations: business rent or lease payments pursuant to lease agreements for real or personal property in force before February 15, 2020 (“business rent or lease payments”); and (c) covered utility payments: business payments for a service for the distribution of electricity, gas, water, transportation, telephone, or internet access for which service began before February 15, 2020 (“business utility payments”). An eligible nonpayroll cost must be paid during the Covered Period or incurred during the Covered Period and paid on or before the next regular billing date, even if the billing date is after the Covered Period. Eligible nonpayroll costs cannot exceed 25% of the total forgiveness amount. Count nonpayroll costs that were both paid and incurred only once. The amount of loan forgiveness the Borrower applies for may be subject to reductions as explained in PPP Schedule A. 

Recent articles for you

By Kim Santos April 14, 2025
For business owners considering their endgame, learning what makes a company valuable can feel overwhelming. Buyers prioritize factors like recurring revenue, a differentiated product or service, and a leadership team that operates independently from the owner. If a business doesn’t check every box, it can seem as though selling is perpetually just out of reach. But perfection is not a prerequisite for a sale. While improving the key drivers of value is important, an imperfect business can still be highly desirable to the right buyer. In fact, some acquirers actively look for businesses with fixable flaws because they see an opportunity to increase value. Blake Hutchison on Why Imperfections Can Be to an Acquirer’s Advantage Blake Hutchison, CEO of Flippa, has witnessed thousands of business acquisitions. Flippa is an online marketplace where business owners can buy and sell companies, particularly small to mid-sized digital businesses. The platform connects sellers with buyers looking for opportunities to grow or optimize an acquisition. In a recent Built to Sell Radio interview, Hutchison explained that many business owners assume their company won’t attract buyers because it has shortcomings. In reality, most acquirers aren’t looking for perfection—they’re looking for potential. Many buyers have a strategic advantage, whether it’s a strong distribution network, operational expertise, or access to capital, that allows them to take an imperfect business and make it more valuable. A prime example of this is the acquisition of PetCoach. How PetCoach Turned an Imperfection into a Selling Point PetCoach, co-founded by Brock Weatherup, was a two-sided marketplace designed to connect pet owners with veterinarians. The challenge for any marketplace business is keeping both sides in balance—generating enough demand from pet owners while ensuring there are enough veterinarians to meet that demand. PetCoach had built a strong product, but it lacked a broad distribution channel to acquire pet owners at scale. Without a solution, growth would remain limited. Instead of seeing this as a dealbreaker, Weatherup positioned it as an opportunity for the right buyer. That buyer was Petco. With more than 1,500 locations across the U.S., Mexico, and Puerto Rico, Petco had access to millions of pet owners. By acquiring PetCoach, Petco could instantly expand its offerings while solving PetCoach’s biggest challenge. Weatherup didn’t need to fix the scalability issue before selling. He needed to find an acquirer for whom the business’s weakness was actually a competitive advantage. Your Business Has Value—Even if It’s Not Perfect This doesn’t mean business owners should ignore the fundamentals of value creation. Strengthening factors like recurring revenue, customer retention, and operational efficiency will always increase a company’s attractiveness. However, not every issue needs to be resolved before an exit. Instead of viewing imperfections as obstacles, business owners should consider how an acquirer might perceive them: A company struggling with customer acquisition may be a great fit for a buyer with an established customer base. A business with inefficient operations might attract an acquirer with expertise in streamlining processes. A company overly dependent on its owner could be appealing to a buyer with a strong leadership team ready to step in. As Blake Hutchison explains, acquirers are often looking for businesses where they can add value. The key is to position the company in a way that highlights its strengths while framing its imperfections as untapped potential. The right acquirer won’t see weaknesses as dealbreakers—they’ll see them as opportunities.
By Kim Santos April 7, 2025
The garage door industry isn’t the most obvious place for a business empire. Yet in just a few years, Guild has emerged as a dominant force, consolidating a fragmented market into a scalable platform worth millions. If you’re a business owner in a fragmented industry, Guild’s story raises two pressing questions: Could my industry be next for a roll-up, and if it is, should I lead the charge or sell to someone else? The roll-up model—acquiring and integrating small businesses in a fragmented market to create economies of scale—isn’t new, but its reach has expanded. From veterinary clinics to plumbing companies, private equity firms are creating billion-dollar platforms from businesses once considered too small to attract institutional capital. Roll-ups are like waves. Catch one early, and you can ride it to a lucrative exit. Private equity firms often pay a premium to consolidate a market, and the scarcity of scaled businesses drives multiples higher. Wait too long, however, and the wave dissipates. You’re left competing with a PE-backed giant with better pricing, marketing budgets, and scale. Timing is everything. How to Know if Your Industry Is Ripe for a Roll-Up When Guild co-founders Jordan Dubin, Joe Delaney, and Sean Slavzic set out to create a roll-up platform, they didn’t stumble into garage doors—they chose it methodically. Their approach offers a roadmap for owners wondering if their market is next. Fragmentation The more small, independent businesses in your market, the easier it is to consolidate. In the garage door industry, 92% of operators were small, local businesses—an ideal setup for Guild. Market Size A fragmented market needs to be large enough to justify consolidation. Guild found a $14 billion residential garage door market with plenty of room to scale. Growth Potential Growing markets attract investors. Garage doors were growing at 7–8% annually, compared to 3–4% for more saturated sectors like HVAC. Precedent Transactions A notable sale in your industry can validate its attractiveness. The sale of A1 Garage Doors to CoreTech at 21 times EBITDA signaled strong demand for scaled players. Scalability Industries with standardized, repeatable processes are easier to integrate and scale. Garage door companies focus on repairs and installations, making them well suited for roll-ups. Timing By the time Guild entered, private equity had already saturated HVAC and plumbing, leaving fewer opportunities. Garage doors offered Guild the chance to be a first mover and capture value early. Should You Sell or Lead the Roll-Up? If your industry meets these criteria, you’re likely at a crossroads. Do you sell to a roll-up or lead one yourself? Both options have merit, but the best choice depends on your goals and appetite for growth. Selling to a Roll-Up Selling offers liquidity and the chance to step back. To maximize your exit: Focus on EBITDA. Build systems. Make your business less dependent on you. Clean up financials. Transparent books boost valuation. “Private equity doesn’t want to buy a job; they want to buy an asset,” says Dubin. Failing to position your business as turnkey could mean leaving money on the table. Leading the Roll-Up If you’re not ready to sell, consider consolidating your industry. By acquiring competitors, you can scale your business, increase its value, and become the dominant player in your market. Dubin and his partners raised $35 million to launch Guild. “There’s too much money in the world and not enough good opportunities,” he says. Starting a roll-up requires capital, operational expertise, and a clear vision, but it lets you control your industry’s future instead of waiting for someone else to define it. The Wave Won’t Wait Markets ripe for roll-ups don’t stay that way forever. Once private equity enters, competition drives valuations higher and makes acquisitions less attractive. Early movers capture the lion’s share of value, whether they’re selling or leading the charge.
By Kim Santos March 31, 2025
Supplier risk can erode the value of your company. When a potential acquirer examines your business, they look for red flags. A major one: relying too heavily on a single supplier—whether that’s a sole raw material provider or a platform like Amazon that controls your primary sales channel. If that key supplier vanishes or changes terms, your profits might vanish as well. This risk often leads to lower valuations in the eyes of buyers. Why Supplier Risk Hurts Valuation Over-dependence on one supplier—or on a single selling channel—makes you vulnerable. Buyers don’t like gambling on a business that hinges on factors outside the owner’s control. If an online marketplace tweaks its algorithm or suspends your account, your revenue may plummet. Acquirers see this fragility and adjust their offer downward. Adi Gullia’s Diversification Example Entrepreneur Adi Gullia saw this firsthand. He built his beauty brand, Grace & Stella, on Amazon’s platform. At first, it looked like a goldmine—his foot-peeling mask soared to $100,000 in monthly sales within nine months. Yet Adi recognized the risk. He knew Amazon could change rules or restrict listings at any moment, putting his entire business at risk. Instead of waiting for that to happen, Adi expanded. He forged relationships with subscription box partners to reach new customers outside Amazon’s control. Next he launched his own ecommerce site, selling directly to consumers. Adi also ventured into retail, signing a major deal with Target. These partnerships allowed him to diversify his revenue streams and build a more resilient business. Retailers like Target appreciated Grace & Stella’s success on Amazon, which served as proof of demand. By reducing his dependence on any single channel, Adi created a business that acquirers found far more appealing. The Impact on Valuation When it came time to sell, Adi’s diversification efforts paid off. His company fetched a valuation of 5.8 times EBITDA—a significant premium over what a typical Amazon reseller might expect. Most Amazon-only brands are valued at three to four times EBITDA, reflecting the higher risks tied to their reliance on the platform. Buyers of Amazon-centric businesses worry about potential account suspensions, de-listings, or increased competition driving down margins. Adi’s diversified revenue streams mitigated these risks, making his business more stable and attractive to acquirers. Practical Steps to Lower Supplier Risk 1 . Add Channels: If you rely on one marketplace, consider starting your own ecommerce store. Test alternative platforms or retail partners. 2. Secure Multiple Suppliers: If raw materials come from one producer, find a backup or two. Even if your costs rise slightly, you’re buying peace of mind. 3. Build Direct Relationships: Capture customer data through your own site. Invest in ways to reach buyers directly—email, social media, subscriptions—so no single platform can cut you off from your audience. Conclusion Supplier risk is a value killer. Buyers pay less for a company balanced on a single weak pillar. Don’t let one supplier or one platform control your future. Take a page from Adi Gullia’s playbook. By branching out to retail with Target, leveraging subscription boxes, and launching an ecommerce site, he reduced his supplier risk. These moves not only stabilized his business but also helped him command a premium valuation. At 5.8 times EBITDA, Adi’s sale was far above the norm for Amazon resellers—proof that diversification strengthens both your business and its ultimate value.