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The Ever-Expanding Road to PPP Forgiveness


Loan forgiveness.

Over the past weeks, these two simple words have become all-consuming for millions of small businesses who received vital funding under the Paycheck Protection Program (PPP). Though PPP loans have been an essential lifeline for businesses during the COVID-19 pandemic, complexity surrounding loan forgiveness presents a formidable challenge. Employers are anxious to put the forgiveness process behind them; however, it may just make sense, for now, to apply the brakes on the race to forgiveness.

On July 23, the Small Business Administration (SBA) announced that it will not be accepting PPP loan forgiveness applications until August 10, 2020, and may further extend this date if new legislation brings changes to the forgiveness process.

In addition, the SBA had announced that it would release updated guidance on forgiveness but has not yet done so.

Recent SBA hiccups may also indicate the wisdom of waiting until kinks in the system are ironed out. On July 6, the SBA released a report with the names of 660,000 small businesses that received loans of $150,000 and above. Though intended as an attempt at transparency after a portion of the first round of PPP funding was siphoned by large companies with ties to major banks, the new report is riddled with anomalies. For example, the PPP was designed to keep employees on payroll, but out of almost 4.9 million loans, 554,146 show zero “jobs retained” and 324,122 loans show “blank”; several loans even list negative job numbers.

Additionally, many business owners were shocked to find their company listed on the report when they had not even applied for a loan. This problematic report doesn’t generate confidence in the SBA’s processing of loans and may raise some doubts as to the SBA’s readiness to tackle forgiveness.

Employers may also want to make sure they have all the facts before submitting the complex forgiveness application. On June 16, in response to the Paycheck Protection Program Flexibility Act (PPPFA), the SBA released its revised PPP loan application, including an “EZ” version of the form. Loan forgiveness, however, is anything but easy. Employers must gather wage, health insurance, and pension plan data, along with documentation of mortgage interest, rent, and utility payments. In addition, many employers must determine if they reduced employee salaries or workforce counts relative to lookback periods, potentially reducing their loan forgiveness amount.

Not surprisingly, the American Institute of CPAs (AICPA) recommends that borrowers wait for final guidance before submitting their application.

In the face of all this uncertainty, a faint ray of light may bring relief to employers. On June 30, the Paycheck Protection Program Small Business Forgiveness Act was introduced in the Senate, proposing automatic forgiveness for PPP loans under $150,000. This bill, which covers approximately 86% of all loans granted but only 26% of funds, would lift a huge administrative burden from many small businesses who are trying to keep their heads above water during the pandemic. Though the bill is still in the Senate, some employers may decide to wait and see if they’ll be exempt from the forgiveness application process.

Ironically, the PPP has become both a necessity and a nuisance. Despite all the unknowns, one fact is certain: millions of small business owners are going through unprecedented economic challenges. Reliable data and clear guidance are essential for small businesses to successfully navigate PPP loan forgiveness. Oh, and maybe a couple of deep breaths.

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