What to Do After Getting Your PPP Loan Approved: Your Complete Action Plan

You just received approval for your Paycheck Protection Program loan—congratulations! But now the real work begins. What you do in the days and weeks following approval will determine whether you achieve full loan forgiveness or end up repaying a significant portion with interest.

The difference between businesses that successfully navigate PPP forgiveness and those that struggle often comes down to one thing: knowing exactly what steps to take immediately after approval. Let's walk through your complete post-approval action plan.

Why Your Next Steps Matter So Much

The PPP wasn't just free money—it came with specific requirements that you needed to meet for forgiveness. According to the Treasury Department, borrowers had to use at least 60% of funds on payroll costs, maintain proper documentation, and follow specific timelines. Missing any of these requirements could mean converting your forgivable loan into actual debt.

Even more critically, the SBA retained the right to audit your loan for up to six years after forgiveness. That means the actions you take today will need to stand up to scrutiny years down the road.

Step 1: Bring Your Team Back (If Applicable)

If you laid off or furloughed employees, your first priority was reconnecting with your team. Rehiring these employees wasn't just good for morale—it was essential for loan forgiveness.

Why this mattered: The PPP's forgiveness formula included a Full-Time Equivalent (FTE) reduction calculation. If your average FTE count during your covered period fell below your baseline (generally the period from February 15, 2019 to June 30, 2019, or January 1, 2020 to February 29, 2020), your forgiveness amount could be reduced proportionally.

Action steps:

• Contact laid-off or furloughed employees immediately
• Document all rehire offers in writing, even if employees declined
• Keep detailed records of wages paid and hours worked
• If employees refused to return, document the offers—these situations had safe harbors that protected your forgiveness amount

Pro tip: Even if you couldn't immediately restore employees to their previous responsibilities due to reduced business, keeping them on full payroll during the covered period was often the right financial move if it meant full loan forgiveness.

Step 2: Set Up Dedicated Financial Tracking

One of the biggest mistakes businesses made was mixing PPP funds with regular operating accounts without clear tracking systems. This made documenting proper use nearly impossible when forgiveness time came.

Open a separate account: Many financial advisors recommended opening a dedicated checking account specifically for PPP funds. This created a clear paper trail showing exactly how every dollar was spent.

Track the 60/40 rule: At least 60% of your PPP loan had to go toward payroll costs, with the remaining 40% available for:

• Mortgage interest payments (not principal)
• Rent payments
• Utility payments
• Covered operations expenditures
• Covered property damage costs
• Covered supplier costs
• Covered worker protection expenditures

Set up your categories: Create accounting categories that directly mapped to SBA forgiveness requirements. This made generating your forgiveness application infinitely easier.

Step 3: Implement Bulletproof Documentation Systems

When it came to PPP forgiveness, "good enough" documentation wasn't good enough. The SBA could request detailed records, and lenders often had specific requirements for the forgiveness application.

What you needed to track:

• Amount spent: Exact dollar amounts for every transaction
• Date of transaction: When the expense occurred, not when you paid it
• Purpose and recipient: Who received payment and why
• Supporting documentation: Original receipts, invoices, cancelled checks, or bank statements

Payroll documentation required:

• Bank account statements showing payroll payments
• Tax forms (940, 941, state quarterly wage reports)
• Payment receipts or cancelled checks
• Payroll reports from your payroll provider
• Documentation of any retirement or health insurance contributions

Non-payroll documentation required:

• Copy of your mortgage agreement or lease
• Receipts or cancelled checks for utilities
• Documentation showing payments were made during the covered period
• Proof that expenses were active before February 15, 2020

Critical mistake to avoid: Bank statements alone weren't sufficient documentation. You needed the underlying invoices, receipts, and contracts that proved expenses were eligible under PPP rules.

Step 4: Choose Your Covered Period Strategically

You had flexibility in choosing your covered period—either 8 or 24 weeks starting from your loan disbursement date. This choice had significant implications.

The 8-week option made sense if:

• You received your loan early and needed funds quickly
• Your business had recovered enough to maintain payroll independently
• You wanted to apply for forgiveness sooner

The 24-week option was better when:

• Your revenue recovery was slower
• You needed more time to meet the FTE requirements
• You wanted maximum flexibility in spending the funds

Important: Once you chose your covered period, you couldn't change it. Make this decision carefully based on your specific circumstances.

Step 5: Navigate Payroll Timing Carefully

The PPP had specific rules about when payroll costs counted toward forgiveness, and getting this wrong could reduce your forgiveness amount.

The alternative payroll covered period option: You could elect to use the first day of your first pay period following your loan disbursement as the start date of your covered period. This often worked better for businesses with biweekly or semi-monthly payroll schedules.

Paid or incurred rule: Payroll costs were considered paid on the day you distributed paychecks or initiated ACH transfers. For costs incurred but not paid during your covered period, they counted if paid by the next regular payroll date.

What this meant in practice: If your covered period ended on a Wednesday but your next payroll wasn't until Friday, you could include Friday's payroll if it covered work performed during your covered period.

Step 6: Handle Employee Situations Properly

The FTE calculation tripped up many businesses. Understanding the nuances helped maximize forgiveness.

Safe harbors for FTE reductions: You wouldn't face FTE-related forgiveness reductions if you could document that:

• You made a good-faith, written offer to rehire an employee that was rejected
• An employee voluntarily resigned or requested reduced hours
• You were unable to find qualified employees for unfilled positions
• You couldn't restore business operations to February 15, 2020 levels due to COVID-19-related operating restrictions

Documentation was everything: Keep written records of all rehire offers, employee responses, and your attempts to maintain staffing levels.

Step 7: Understand Tax Implications

The tax treatment of PPP loans created confusion, but getting it right was important for your bottom line.

Key tax rules:

• Forgiven PPP loans were not taxable income
• Expenses paid with PPP proceeds were fully tax-deductible
• You didn't need to reduce your deductible expenses by the amount of your forgiven loan

State tax considerations: While federal treatment was clear, some states initially tried to tax forgiven PPP amounts or disallow deductions. Check your state's specific rules or consult with a tax professional familiar with your state's treatment of PPP loans.

Step 8: Prepare Your Forgiveness Application Early

Don't wait until the end of your covered period to think about your forgiveness application. Start preparing immediately.

Form selection: Most borrowers of $150,000 or less could use the simplified Form 3508S. Larger loans required the more detailed Form 3508 or 3508EZ.

Information you'd need:

• Your PPP loan number and disbursement date
• Number of employees at the time of your loan application and forgiveness application
• Payroll costs during your covered period
• Non-payroll costs with supporting documentation
• FTE calculations if applicable

Timing: You could apply for forgiveness any time after your covered period ended, up to the loan's maturity date. However, applying early meant stopping interest accrual sooner (though the rate was only 1%).

Step 9: Communicate with Your Lender

Your lender was your primary point of contact for the forgiveness process. Building a good relationship helped smooth the path.

What to ask your lender:

• What specific documentation do they require?
• What format should documents be in (digital vs. paper)?
• What's their typical timeline for processing applications?
• Who should you contact with questions during the process?

Set expectations: Some lenders were overwhelmed with forgiveness applications. Understanding their timeline helped you plan accordingly.

Step 10: Maintain Records for Six Years

The SBA's audit window extended six years from the date of forgiveness or repayment. That meant your work wasn't done even after receiving forgiveness approval.

What to keep:

• All documentation supporting your forgiveness application
• Records showing your use of PPP funds
• Payroll records and tax filings
• Bank statements covering your covered period
• Any correspondence with your lender or the SBA

Storage recommendations: Keep both digital and physical copies in multiple locations. Cloud storage provided an additional layer of protection against loss.

Common Mistakes That Reduced Forgiveness

Learning from others' errors helped businesses avoid costly mistakes:

1. Mixing unemployment benefits with PPP payroll: If employees collected unemployment while on your PPP payroll, this could create issues with forgiveness calculations.

2. Paying down principal on loans: Only mortgage interest counted toward forgiveness, not principal payments.

3. Missing the deadline to restore FTE: Some borrowers didn't realize they had until the end of their covered period to restore their FTE count.

4. Inadequate documentation: Many businesses that used funds properly still struggled with forgiveness because they couldn't provide sufficient documentation.

5. Misunderstanding the 60/40 rule: Some borrowers thought they had to spend exactly 60% on payroll and 40% on other costs. Actually, you just needed at least 60% on payroll—you could use up to 100% on payroll if that worked better for your business.

What If You Couldn't Meet All Requirements?

Not every business achieved full forgiveness, and that was okay. Partial forgiveness was still valuable.

Understand your options:

• Partial forgiveness reduced your loan balance
• Any unforgiven amount became a 1% interest loan with a maturity date
• You had a six-month deferral period from the end of your covered period before payments began

When repayment made sense: In some cases, especially for smaller loans, businesses chose to repay rather than navigate the complexity of forgiveness applications. At 1% interest, this was often a reasonable business decision.

Keep Your Financial Records Organized Beyond PPP

Whether you achieved full forgiveness or not, the PPP experience highlighted the importance of robust financial tracking systems. The discipline you developed tracking PPP funds should extend to all your business finances.

Accurate bookkeeping from day one prevents headaches later—not just for loan forgiveness, but for tax preparation, financial analysis, and business planning. Many businesses found that the systems they implemented for PPP tracking improved their overall financial management.

Simplify Your Financial Management

Managing PPP funds properly required meticulous record-keeping and financial organization. If tracking every expense and maintaining proper documentation felt overwhelming, you're not alone. Beancount.io provides plain-text accounting that gives you complete transparency and control over your financial data—every transaction is readable, version-controlled, and AI-ready for modern financial analysis. Get started for free and experience financial management built for clarity and control.