PPP Loan Forgiveness
2020 – 08/27 by Lori Eads, CPA
We know many of you who received Paycheck Protection Program (PPP) loans under the Coronavirus Aid, Relief, and Economic Security (CARES) are anxious to apply for forgiveness! However, as we learned during the application process, it can be helpful to be patient and wait for final guidance before spending time and resources interpreting rules that are still evolving. We believe it is advisable to wait before applying due to some of the following factors:
Automating the Process
Although we know some of you have received notification your lender is now accepting forgiveness applications, most lenders are not ready to process them yet. Many are developing technology tools such as “forgiveness portals” or will leverage other automation options for a more efficient process. Until the U.S. Small Business Administration (SBA) and the U.S. Treasury Department issue final guidance, those technology tools can’t be finalized. The timing on when that guidance will be available is uncertain.
Simplifing the Process
Applying for forgiveness may be easier than clients anticipate. There is a simplified process available for certain borrowers through SBA Form 3PPP508EZ and likely a streamlined process for some soon to be announced minimum loan amount that should greatly reduce the documentation requirements currently published.
A Longer Coverage Period
Organizations now have 24 weeks to use their PPP money, leaving them more time to take steps that will help them qualify for full loan forgiveness. Borrowers who received their loans before June 5, 2020, can choose either eight weeks or 24 weeks for their covered period. That increased flexibility in the time to use PPP funds can be important in maximizing loan forgiveness.
Customized Payroll Reports
Payroll costs are a significant component of PPP forgiveness. Many payroll providers are developing custom reports specifically to comply with PPP guidance. However, like lenders, they are waiting on final SBA and Treasury guidance so they can prepare the PPP-compliant reports borrowers will need.
Loan Payments Aren’t Due
Borrowers aren’t required to make any loan payments before they apply for forgiveness or until 10 months after their covered loan period ends. Since payments aren’t due yet, there is less urgency to apply for forgiveness.
Of course, we encourage businesses to prepare for the forgiveness application process by gathering documentation needed to support non-payroll costs for expenses such as mortgage interest, rent or lease payments and utilities, including account statements and other proof of payments. Lenders may not request supporting documentation for all disbursements as part of the forgiveness application; however, increased scrutiny is guaranteed for loans of $2,000,000 or more.