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PPP Loan Forgiveness: Should I wait to apply?

Many organizations were fortunate to have received a much-needed financial lifeline earlier this year in the form of a Paycheck Protection Program (PPP) loan.  The PPP loan roll-out was a coordinated effort between the United States Small Business Administration (SBA) and participating financial lending institutions.  The PPP loan program skyrocketed in popularity as lawmakers included provisions for these loans to become fully or partially forgivable if the funds were used for qualified costs.

PPP Forgiveness

While the initial application process was challenging, the rules governing the use of funds and the qualification for loan forgiveness has been a confusing and ever-changing process to say the least.  Many banks have begun accepting applications for loan forgiveness now that the deadline to apply for a PPP loan (August 8, 2020) has passed.

Many loan recipients are anxious to submit an application for forgiveness, especially if it seems apparent on the surface that 100% forgiveness will be obtained.  However, the decision to apply for forgiveness is not one to be done in haste.  The consequences could include an unexpected reduction in the forgiveness amount as well as an administrative burden with the application that may be avoidable.

How would another stimulus package affect current PPP Loans?

Congress recently adjourned without passing a much anticipated second stimulus package.  However, the groundwork for the legislation has been laid with the HEROES Act (House version) and the HEALS Act (Senate version).  Many PPP loan provisions have been included in the proposals.  A few points of interest to borrowers include a no-documentation forgiveness process for loans of $150,000 or less, a simplified forgiveness process for loans between $150,0000 and $2,000,000, and the inclusion of additional costs that could qualify for forgiveness. 

With some substantial changes pending, YHB is recommending businesses be patient with filing for PPP loan forgiveness. Particularly, if you received less than $2 million it might make sense to save yourself the trouble of compiling the data as it might not be necessary to submit with your applications, at least until the final bill is released. 

What’s next?

With Congress set to reconvene after the Labor Day Holiday, it may be prudent to wait on any changes to the rules before your forgiveness application is submitted.  In addition, the much-needed clarification on the tax deductibility of PPP loan expenses could be clarified as well.  Borrowers have 10 months from the end of their covered period to file for loan forgiveness.  However, obtaining a decision on forgiveness prior to December 31, 2020 could simplify the tax reporting if your business operates on a traditional calendar year.

Your team of trusted advisors at YHB are closely monitoring the PPP loan situation and will be swift to provide you with updates as they become available.

Chris Frye is a Principal at YHB in our Winchester, Virginia office. Chris specializes in assisting clients with strategic performance management, including the implementation of dashboards and overall process improvements.

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