What You Need to Know About PPP Loan Forgiveness: Additional SBA Guidance
Daniel B. Harris Oct. 5, 2020
Congratulations! You successfully navigated the Paycheck Protection Program (PPP) loan application process and you were awarded a loan from the SBA. You have spent all the funds in accordance with your advisor’s recommendations and your business’ needs. Now you would like to apply for forgiveness of that loan to turn it into a grant. What do you need to know and what actions do you need to take? Have no fear, the SBA recently issued additional guidance in the form of FAQs to assist you.
Will you need to submit documents with original signatures in ink? It is acceptable to submit digital or scanned copies of any applications or supporting documentation for your loan forgiveness request. Any signatures or consents that you need to provide may also be completed electronically. You should check with your lender/servicer, to make sure their internal rules also allow for this.
If you submit your forgiveness application during the 10-month period after the covered period of your loan ends, then you will not be required to make any loan payments until the forgiveness amount is determined by your lender.
You may elect an Alternative Payroll Covered Period if that aligns better with your payroll practices than the standard Covered Period. Payroll costs incurred during the period are eligible for forgiveness if they are paid by the following payroll date after your period ends.
If you took an Economic Injury Disaster Loan (EIDL) advance, then that amount will reduce any amount of loan forgiveness that you qualify for. If the amount of your EIDL advance exceeds your PPP loan amount, then you will not qualify for any forgiveness.
One important point to remember is that forgiveness is not all or nothing. You may obtain partial forgiveness for the portion of your loan that was expended on allowable expenses and otherwise qualifies under the workforce retention guidelines. If you only qualify for partial forgiveness, then your lender is required to: (1) notify you of the amount of your PPP loan that will not be forgiven, (2) notify you of the date that you are required to start making loan payments, and (3) continue to service your loan over its term.
When should you apply for forgiveness? Many businesses are waiting to file the application for forgiveness since SBA may continue to issue new regulations. Additionally, it appears that another coronavirus relief package is in the works in Congress. It is certainly possible that a new relief package could change the parameters around receiving forgiveness. You may wish to wait a little longer so that there is more certainty before you apply. You should discuss the timing of your forgiveness request with your advisors.
What if you don’t agree with a decision that SBA has made related to your PPP loan or forgiveness of it? There is a process to appeal any decision made by the SBA that negatively impacts you. For instance, SBA is reviewing PPP loans to determine whether the borrower was eligible for all or a portion of the loan they received, if the funds were spent appropriately, to what extent you qualify for forgiveness, etc. If you decide that you need to appeal, then you must include quite a bit of information with your appeal request (copy of the decision you are appealing, a statement of your position, the relief you are requesting, copies of tax filings for your payroll, and additional tax records). You may want to seek help from a trusted advisor to increase your chance of a successful appeal. For more information on PPP loan forgiveness guidelines, see our blog on that topic here.
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