5 Common PPP Loan Mistakes

And How You Can Avoid Them

Last week our blog went over the finer points of the PPP loan and Wallace Capital Funding’s referral program. This week we’re going to talk about mistakes to avoid when applying for the PPP loan.

Dominick Wallace

Dominick Wallace of Wallace Capital Funding

“We have an obligation to help businesses affected by this pandemic. We have an obligation to serve,” Wallace says.

The second stimulus bill expands the categories of approved expenses to give businesses more flexibility when using their PPP loan. In fact, many owners aren’t aware of everything they can take advantage of in this round of funding. Dominick Wallace of Wallace Capital Funding has helped business owners file hundreds of PPP loan applications.

Wallace has noticed several common errors that business owners make when applying for the PPP loan. “These mistakes could cost businesses thousands of dollars or more,” he says.

Common application mistakes:

  • Miscalculating income
  • Not including payroll expenses
  • Using the Wrong NAICS code
  • Missing out on new PPP provisions
  • Not including PPE expenses

“One of the biggest mistakes business owners make is not reporting all income related to payroll expenses,” Wallace says.

Payroll expenses include the following:

  • Gross salary or wage
  • Tips
  • Gross commissions
  • Paid leave (vacation, family, medical or sick leave, not including leave covered by the Families First Coronavirus Response Act)
  • Allowances for dismissal or separation paid
  • Employee benefits costs (including retirement contributions)

 When Calculating Income and Payroll Expenses don’t forget to include:

  • Tips
  • Employee health insurance
  • Employer-provided benefits such as Life insurance
  • Retirement and State Unemployment Insurance
  • K-1 income
  • Damage to property from riots or looting

Help for the Restaurant Industry

Woman holding a "we're open" sign

The PPP offers extra help for those in the restaurant industry

Wallace says this issue has especially affected restaurant owners. “Restaurants have been hit really hard by the pandemic,” Wallace says. This is why the PPP loan has included special considerations for those in the restaurant industry when it comes to their payroll expenses. “They are able to calculate their income at 3.5% times their total payroll expenses. That’s compared to 2.5% for other businesses.” But many restaurants aren’t including cash tips in their payroll expenses. “They are only counting their server’s w-2 income. This becomes an issue because servers often make less than minimum wage, but they make up the difference with tips.”

“I worked with a donut shop that put the wrong NAICS code on their application, and once they corrected that information, they were eligible for more in PPP financing,” Wallace says.

Restaurant employees look at each other through a sneeze-guard

The PPP covers sneeze-guards and other essential PPE for restaurants

Other things to include:

Operations expenses: software subscriptions or services used in your business operations, such as payroll, sales, billing, and bookkeeping (like Bench)

Property damage repairs: costs due to public disturbances in 2020 that insurance did not cover

Supplier costs: essential purchases for your business that you obtained according to a contract, order, or purchase order that was in effect before you received the loan

Worker protection expenses: costs for protective equipment or property improvements made to comply with local or state health guidelines

Opportunities for those serving businesses with PPP Loans:

  • PPE, including sneeze guards
  • Cloud computing
  • Business Software
  • Expenses from vandalism and looting

“It’s really important to do it right the first time, so you don’t miss out on that funding,”- Dominick Wallace

More from Wallace Capital Funding:

PPP Referral Program:

We have developed a Brand New Referral Program  for those of you that working in the industry including:

  • Accountants and CPA’s
  • Tax Preparers
  • Business Consultants
  • Financial Consultants
  • Loan Brokers

“We can pay referral fees, unlike banks,” says Wallace.

Partnering with Wallace Capital Funding LLC for your PPP loan helps to support small and minority-owned businesses. Plus it can help make your clients happy, and who doesn’t want that?


For more information:

Follow Wallace Capital Funding’s Facebook Group: Disaster Loans SBA and Others