Many business owners are beginning to receive Paycheck Protection Program (PPP) loan forgiveness applications from their lenders so we are reaching out with information to address some of the common questions we are receiving.
#1: In most instances, there is no benefit to receiving loan forgiveness approval right away.
There is no impact on cash flow, and no impact on working capital if the borrower is using debt accounting for the PPP. Debt covenant waivers for violations created by the existence of the PPP loan should not be difficult to obtain – in most instances the primary lender is also the institution that the borrower received the PPP loan from. The loans do not enter into repayment status until 10 months following the conclusion of the 24-week covered period – over a year from today for borrowers that were early participants in the PPP.
#2: Most banks are not processing PPP loan forgiveness applications yet.
The SBA has indicated that their portal will be available for lenders to access on August 10, unless new legislation or technical guidance is issued which would delay release of the portal. It is not certain but anticipated that the next round of stimulus legislation will include changes to PPP loan forgiveness that would impact the portal and delay its release.
#3: The loan forgiveness application will be simplified for borrowers that use only cash compensation towards loan forgiveness.
#4: The most complicated part of the application is the calculation of FTE and individual wage reductions.
Many payroll providers are still building the reports to report this information – it will be time consuming and more expensive to manually calculate Tables 1 & 2 to the PPP Schedule A Worksheet if you have more than a handful of employees.
#5: There have been no recent changes to the PPP, but it is anticipated that this next round of stimulus legislation will include some modifications to the program.
There have been proposals to grant automatic forgiveness to loans under a certain dollar threshold and to expand eligibility to use the 3508 EZ application. Any future modifications are expected to benefit borrowers that have already obtained PPP loans.
Be sure to connect with your trusted advisor at BerganKDV for assistance in making the best decision for your situation. You can call our task force and we’ll get you the answers, the listening ear and/or the quick support you need: 888-356-2295 or firstname.lastname@example.org.