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Analyzing PPP Loans through Financial Modeling

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Payroll Protection Now Available

As federal, state and local governments attempt to help both individuals and businesses through the COVID-19 recession, the Small Business Association (SBA) has released information on how to apply for the Payroll Protection Program (PPP) loan.

Qualifying businesses may be eligible for PPP loan forgiveness if the loan amount is used strictly for authorized purposes, which include payroll, rent, mortgage interest or utilities.[1] Further, the stipulations require that a minimum of 75% of the loan value must be used for payroll purposes, and businesses must keep specified staffing levels for at least eight weeks to qualify for loan forgiveness. The other 25% of the loan amount can be used to cover other costs related to rent, mortgage interest payments, and utility payments.

Financial Modeling Could Save You from Reimbursements

The surge of PPP loan applications demonstrates small businesses’ critical need for financial support due to widespread government shutdowns meant to slow the spread of COVID-19. While the PPP loan is a great opportunity for businesses to receive an essentially “free” influx of cash, it is also important to assess various scenarios and adjust for future ramifications by analyzing future solvency through financial modeling.

The PPP loan program is a complex loan to incorporate into standard spreadsheet-based financial model due to its unique loan forgiveness and term stipulations. Modeling out integrated financial statements, especially multiple statements representing different financial scenarios, in a spreadsheet would be tedious and time-consuming. Synario is especially adept at building in loans with custom repayment logic and timelines due to its patented layering technology.

Modeling the PPP Loan with Synario

Several of Synario’s clients are taking advantage of the new PPP loan to continue business operations and keep employees on the payroll during the pandemic. However, they are incorporating the loan as a toggled initiative, meaning they can analyze their future financial state with or without the loan, leading some to unexpected findings.

One client noticed a required repayment of 20% of the loan based off of their usage of the total loan amount. Through financial modeling in Synario, they are weighing the pros and cons of continued personnel costs, potential COVID-19 scenarios, and the PPP loan repayment value versus cash influx.


The client is able to easily identify how the loan will or will not impact their business over the next one to five years by selecting the difference or “diff” initiative switch. This isolates line items across all three financial statements, including cash flow, that are impacted by the PPP loan. As the client switches to different scenarios, their model automatically updates to show new projections in real-time.

With Synario, there is no need to perform major model surgery or edit multiple projected values to incorporate custom loan amounts. By simply creating a new table for the loan amount, incorporating usage logic, and layering in the loan as an initiative, our clients are able to see a more comprehensive view of what financial trajectories are available to their businesses.

The PPP loan is a great opportunity for businesses struggling to remain financially viable, however, it could contain unforeseen repayments based on usage. Analyzing PPP loans using Synario’s financial modeling platform is an effective means through which businesses can view the full spectrum of financial outlooks available to them.

[1]  Paycheck Protection Program