Updated: Nov 23, 2020
We have been receiving a number of questions surrounding the PPP Loan Forgiveness. There are some lenders who are currently accepting loan forgiveness applications. Here is our general advice on the current state of PPP Loan forgiveness:
Please check with your lender BEFORE doing any work related to PPP Loan Forgiveness as to the exact process you need to follow. A number of lenders have their own portals for generating the forgiveness application while others request you fill out the completed application form supplied by the SBA.
If your loan was under $50,000 AND your lender is accepting loan forgiveness applications, you can go ahead and apply Or you can wait to apply in 2021.
New guidance has eliminated the salary reduction and FTE forgiveness reduction requirements for loans under $50,000. Without those concerns, an organization can use the 24 week covered period for forgiveness and have 10 months from the ending date of that covered period to apply for loan forgiveness. For example, if you received under $50K of PPP funds in April 2020 and use the 24 week covered period, you would have until July 2021 to apply for forgiveness.
We are also hopeful future COVID relief legislation will grant automatic loan forgiveness to PPP loans under a certain threshold ($150,000 is currently proposed).
The SBA has recently released a new form streamlining the forgiveness process for those with loans under $50,000
Application form if you received a PPP Loan of $50,000 or less. (Borrowers with loans under $50,000 are now exempt from any reductions in forgiveness based on Reduction in Full Time Equivalent Employees and Reduction in Salaries).
If your loan was over $50,000 and under $150,000 we are advising to continue to wait. There are a few reasons:
There is still hope that congress will come to an agreement on another COVID-19 stimulus package including automatic forgiveness for PPP Loans under $150,000. From what we have read, there is bi-partisan agreement on automatic forgiveness of some PPP loans.
There is plenty of time to submit a loan forgiveness application.
Per the SBA guidance. Borrowers may submit a loan forgiveness application any time before the maturity date of the loan, which is either two or five years from loan origination. However, if a borrower does not apply for loan forgiveness within 10 months after the last day of the borrower’s loan forgiveness covered period, loan payments are no longer deferred and the borrower must begin making payments on the loan. For example, a borrower whose covered period ends on October 30, 2020 has until August 30, 2021 to apply for forgiveness before loan repayment begins.
The Covered Period is either (1) the 24-week (168-day) period beginning on the PPP loan disbursement date, or (2) if the borrower received its PPP loan before June 5, 2020, the borrower may elect to use an eight-week (56-day) Covered Period.
There are a number of banks not accepting forgiveness applications as they are waiting on further guidance/ legislation. Lenders do not want to invest in loan forgiveness processing if there will be upcoming legislation on automatic forgiveness. While the Treasury Secretary has said to not delay in applying for forgiveness, he has indicated a willingness to include automatic loan forgiveness in future COVID legislation.