Don’t Rush to Forgiveness for your PPP Loan

Hoping to lock-in forgiveness of your PPP loan right away? While that could remove one of the many stresses organizations are facing right now, postponing applications for forgiveness may offer more opportunities and smoother processes for loan forgiveness later.

Why wait?

1) Congress is currently debating a new round of COVID-19 relief, which may include changes to the forgiveness requirements for PPP loans. While nothing is final yet, the forgiveness requirements for smaller PPP loans (up to $100,000 or $150,000) may be relaxed.

The SBA and Treasury are expected to release FAQ’s sometime after legislation is finalized and signed into law, which Congress hopes to finish before August 8th.

2) SBA will not start accepting PPP loan forgiveness applications until their new software platform goes live. The platform is scheduled to go live on August 10th, but could be delayed if the new legislation changes the forgiveness process.

3) The current deadline to apply for forgiveness is 10 months after the loan’s covered period. Each PPP loan’s covered period is based on the details of the loan, but the program has not been in place long enough for borrowers to have reached the 10 month deadline. You still have time!

What to do while you wait?

1) Organize your documentation.

When it is time to apply for forgiveness you will need to have detailed information about your employees and payroll costs, both before and after you received your PPP loan. Having records of employee pay, hours, and reasons for any reductions in workforce will help you determine the amount eligible for forgiveness. If you were not able to keep all of your workers employed, the amount that can be forgiven is generally reduced. However, there are several exceptions to this, and good documentation can help you maximize loan forgiveness.

You are allowed to use a portion of PPP loan funds to pay rent, some mortgages, and utilities, depending on the number of employees you retained and their rates of pay. Additional guidance from the SBA may expand the definition of qualifying utilities and other expenses.

2) Contact your advisors and stay current on legislation.

Each organization that received a PPP loan has unique characteristics that will factor into deadlines and the maximum amount forgivable. Staying current on new legislation and staying in touch with your advisors will help you be prepared to apply for the maximum forgiveness as soon as clear information about new legislation is available and the software systems are in place to process your applications.