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PPP Forgiveness Tips (Hint: Time is of the Essence!)

Forbes magazine contributor Alan Gassman said it best when he recently wrote that the Small Business Administration “gave new weekend plans to those of us who advise borrowers and banks on how to plan for and understand the PPP loan forgiveness rules and process.”

Gassman is of course referring to the recently released an 11-page PPP loan forgiveness application that was promised to bankers and businesses by the end of April and new “Interim Final Rules” spanning 26 pages. The rules are meant to provide clarity on PPP loan review and forgiveness as well as the responsibilities of both borrowers and bankers. Included in the newest set of rules is a clearer definition of what PPP funds were/are to be used for. According to the SBA, costs and payments made for the PPP “covered period” include payroll costs, mortgage interest, rent, and utilities.

Since the beginning (early April), when PPP funds were released, borrowers reported struggling to understand loan stipulations and struggled to spend money exactly in accordance with SBA directives. Initially, according to several bankers, the SBA urged any business owner who might have trouble staying operationally solvent to apply for a PPP loan. Now some lenders feel they are left holding the bag for the SBA’s evolving directives and retroactive guidance.

New information from the government loan maker include the stipulation that banks are required to issue decisions on borrowers’ forgiveness applications within 60 days of receiving them. The SBA said it would then pay lenders within 90 days.

While the SBA says it has the right to audit any PPP loan (a revision from U.S. Treasury Secretary Steven Mnuchin’s earlier statement that only PPP loans $2 million or greater risked being audited), officials say they will soon outline an appeal process for forgiveness decisions.

Business owners are eager to get the loan application filled out, letter perfect, so they are eligible for forgiveness. To answer questions and provide timely information on the topic, Better Business Bureau NWP solicited help from employment and labor law expert Darin Leong.

Leong explained that although the rule that 75% of PPP funds be used for payroll and 25% used for “nonpayroll” operational costs, legislators in both the U.S. House and Senate are working on bills that would change that formula. Included in the payroll costs are salary, wages, commissions and bonuses, tips, vacation payments, parental, family, medical or sick leave, payments for group health coverage, retirement and hazard pay.

Leong noted that although the new interim rules added more meat to the plate, more tweaks could be coming.   

“Rules have continued to layer one on top of the other,” Leong said during a PPP-focused webinar this week. “…In the next one or two weeks, things could change significantly.”

Even as the SBA rolls out new rules, borrowers’ chief concern remains maximizing the amount of their loan that is forgivable. Timeliness is a vital component for businesses to file for loan forgiveness. Experts recommend the following tips for PPP borrowers:

  1. Read the PPP loan forgiveness form (it may be overwhelming, but you have to start somewhere).
  2. If the PPP Loan Forgiveness Application seems daunting, solicit help.
  3. Spending money on a CPA or accountant who understands your business and has studied the PPP could help you maximize your loan forgiveness. These professionals can also help you help you understand gray areas and bolster your confidence in filing.
  4. Many fintech (financial technology) companies are helping banks and borrowers streamline PPP loan forgiveness. Ask your lender if they have a software that helps automate any of the workload and/or integrates with your Quickbooks or other accounting software.

For more important PPP content, hear it here from expert Darin Leong himself.

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Written by Hannah Stiff

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