PPP Loan Forgiveness – Why It Might Be Smart to Wait

In general, our business clients are people who plan ahead and like to have things in order. If that describes you, you might be tempted to get your PPP loan forgiveness paperwork out of the way as soon as possible. However, like many things in 2020, the rules about the PPP are ever-changing, and there are some substantial reasons you might want to wait to file your PPP loan forgiveness paperwork. Here are six:

1. Your bank may not be ready. PPP loan forgiveness applications are not submitted by the borrowers – they are submitted by lenders – and some banks are still developing their submission portals and refining their processes.
2. The PPP loan term affects its eventual due date. If a borrower elected to spend the loan money over a term of 24 weeks, the loan doesn’t become due until 10 months after that 24-week period. At that 10-month mark, if the borrower hasn’t submitted paperwork for forgiveness, the loan payment will be due. With everything else small business owners are managing right now, there should be less urgency around ensuring forgiveness for a loan that isn’t due for several months.
3. The paperwork is quite complicated, and payroll providers are working to make sure their clients have exactly the documentation they’ll need. This process is likely to get easier as payroll companies work out the most efficient way to get their clients the right information in the correct format.
4. There are still questions about the circumstances under which utilities costs are eligible for forgiveness, as forgivable expenses are still unclear.
5. More rules may get clarified over the next few months, even if new legislation isn’t passed. For example, on August 24, the Small Business Administration clarified the rules about owner-employee salaries as well as about various situations related to rent and mortgages.
6. There may be a new bill related to COVID-19 relief for businesses, but that isn’t possible until after Labor Day, when Congress is back in session. One of the proposals on the table is to automatically forgive loans under $150,000 and simply audit select businesses to guard against fraud. The Senate bill also would relax the rules for loans of $150,000 to $2 million by eliminating the requirement that businesses provide documentation (payroll sheets) demonstrating that the loan was spent on payroll. These new rules could make the whole process quite a bit easier for most borrowers (and banks), so it might be worth holding off to see what, if anything, gets passed in September.

Nearly 5 million businesses received PPP loans, and many of our clients are among them. We are keeping a close eye on the latest guidance and the pending legislation, and we can help make sure you have what you need to apply for forgiveness when the time comes. If you have questions about your PPP loan, reach out to us at info@sbfcpa.com.