By Jeff Jacobs
Because PPP loan amounts are based on 2.5 times the company’s 2019 average monthly payroll cost, this funding alone may not be enough to keep many small businesses afloat.
PPP loans also require business owners to spend a certain percentage of their funding on employee salaries. However, the majority of business budgets consist of day-to-day operational expenses like utilities and rent, not just payroll.
For businesses that received PPP loans, invoice factoring may be a way to meet financial obligations that government loans can’t cover. It can also be a way to ensure that PPP loan rules are being met without falling behind on other funding needs.
For example, if your business needs new equipment or rent is due, it can be tempting to dip into PPP funding to cover these expenses. To be eligible for PPP loan forgiveness, however, business owners are required to spend at least 60% of funding on payroll or salaries.
Invoice factoring can allow you to keep up with these crucial, non-payroll expenses without losing eligibility for loan forgiveness. This can help keep your business stable while saving you money down the line.