The Aug. 8 deadline to submit a Paycheck Protection Program (PPP) loan application has come and gone, making this a good time for an update on where the program stands. As borrowers begin to focus on the forgiveness process, they should pay particular attention to the following items:
- On Aug. 4, the Small Business Administration (SBA) issued a 10-page document with 23 frequently asked questions on the loan forgiveness application, covering various topics related to general loan forgiveness, payroll costs, nonpayroll costs and loan forgiveness reductions. It is not complete, however, as the SBA still needs to issue guidance on how to calculate full-time equivalent (FTE) reductions when a borrower applies for forgiveness before the end of their covered period.
- Congress was not able to reach consensus on a new stimulus package prior to its scheduled recess on Aug. 8. This next package is anticipated to contain final guidance related to the PPP loan forgiveness application process. One key item being discussed is potential automatic forgiveness for loans under a certain dollar threshold. Also, it is possible Congress may issue legislation to reverse IRS Notice Number 2020-32, which disallows borrowers from deducting expenses paid with the proceeds from their PPP loan for tax purposes. The American Institute of Certified Public Accountants (AICPA) anticipates negotiations will continue through the August recess and a final bill may be passed in September.
- On Aug. 10, the SBA launched a platform that allows participating banks to submit completed loan forgiveness applications to the administration for review. If a borrower submits its loan forgiveness application within 10 months of the completion of their covered period, the borrower is not required to make any payments until the forgiveness amount is determined by the SBA. Banks are currently working on updating their internal platforms to begin receiving borrowers’ loan forgiveness applications. Once an application for forgiveness is submitted by the borrower to the bank, the bank has 60 days to approve and submit the application to the SBA. The SBA then has 90 days from the day it receives the application to review and approve the forgiveness amount.
Given the uncertainty with pending legislation and when banks will be able to start accepting loan forgiveness applications, we are currently in a bit of a holding pattern. If you are interested in working through a forgiveness calculation, the AICPA has introduced an interactive calculator which automates the forgiveness process for small business owners (it can be found at PPPForgivenessTool.com). Borrowers or their CPA advisors can log in to fill out the forgiveness application, and the tool produces all government-mandated forms automatically. We recommend reaching out to your bank to verify what documents are required for submission and if the bank will require you to use its exclusive online platform.
For more information on PPP loans, the forgiveness process or any questions related to CARES Act relief, please feel free to reach out to McClintock & Associates.