Lenders are beginning to provide avenues for borrowers to apply for forgiveness of their Paycheck Protection Program (PPP) loans. Many PPP borrowers are working diligently to understand and follow the guidelines for forgiveness so they can apply as soon as possible. As has been the case with this program from the beginning, guidance and changes are ongoing and are expected to continue. We are providing you with information to consider as you determine when you should apply for PPP loan forgiveness.
Why you might want to wait to apply for PPP loan forgiveness:
- The covered period was extended to 24 weeks (from the original 8 weeks). This will benefit most borrowers by allowing more time to spend the funds on allowable expenses. Additionally, a borrower is allowed to apply for forgiveness up to 10 months after the last day of the covered period which will be well into 2021 form many borrowers.
- Why be the first to apply? This program and it’s processes were rolled out with unprecedented speed, which has led to ongoing changes, different processes that can vary by lender, and frustrations for borrows. You may want to consider waiting to apply to let the process become more clear and streamlined.
- Pending legislation may further ease the forgiveness process. A bill is currently pending to streamline the process for forgiveness of all loans under $150,000. Lenders would be able to rely on a signed one page certification by the business owner that the funds were used according to the intentions of the law for those loans under $150,000. There are also provisions in the bill to streamline the forgiveness process for loans between $150,000 and $2 million. Of course with pending legislation, nothing is certain, however there appears to be wide bipartisan support for the bill.
- Ongoing guidance updates are expected. As recently as 8/11/20 the Treasury Department updated their Frequently Asked Questions (FAQs) related to PPP loan forgiveness and more updates are expected.
- Not all lenders are currently ready to receive forgiveness applications.
Why you might not want to wait to apply for PPP loan forgiveness:
- Applying as soon as possible may benefit you if you anticipate a decline in business and therefore a reduction in FTE or wages but can currently meet the requirements for forgiveness under the 8 week covered period.
- You may have loan covenants or other financial reporting considerations for which forgiveness my benefit.
Regardless of your individual situation, we will be happy to discuss these matters with you, please call or email us with your questions.