PPP Loan Forgiveness Applications — The Saga Continues

By Martin Fox, CPA/ABV, CVA

September 2, 2020

We understand that many banks are beginning to contact PPP borrowers regarding their loan forgiveness applications. Some banks are encouraging borrowers to begin their application process and others are still waiting for more guidance from the SBA and are advising borrowers to be patient.

So what’s going on and what should you do?

For several weeks now, Congress has been in a stalemate over additional help to small businesses. There is talk of a “PPP 2” that would be targeted to the most needy businesses, i.e., those that have been forced to close or greatly reduce their volume of activity. For example, restaurants, bars, hair salons, and gyms would probably fall into this category. There is also talk of granting automatic loan forgiveness for smaller loans (e.g., up to $150,000). However, all of this seems to be caught up in Congressional gridlock.

Because of this uncertainty, the SBA has been slow to issue some needed guidance, preferring to wait for the dust to settle in Congress.

As a result, lenders are forced to delay submission of borrower forgiveness applications to the SBA. Some are accepting applications now, but those applications may not be submitted for a while.

Leaders in our profession are advising… PATIENCE. If your loan was for less than $150,000, it’s probably in your best interest to wait and see if it will be automatically forgiven. If your loan was for more than $2 million, you should wait to see if the SBA issues more guidance or clarification like they issued last week (see below). Loans for over $2 million will be reviewed by the SBA and you’ll want to be sure your forgiveness application has been prepared correctly. For those in between, patience is still advised just in case there are new interpretations from Congress or the SBA.

New rules issued by SBA

On August 24, the SBA issued clarification on three items that will affect many borrowers:

  1. Owner-employees with less than a 5 percent ownership stake in a C- or S-Corporation are not subject to the owner-employee compensation rule.
  2. Rent and utilities paid on shared or sub-leased property may only include the portion attributable to the borrower.
  3. Rent paid to related parties is eligible for loan forgiveness, but only to the extent of the mortgage interest paid by the related-party landlord.

Loan forgiveness applications prepared prior to these rules may have been prepared incorrectly. This is just an example of changes that may still be coming.

Even though you may want to hold off on filing your application, you can still move forward in preparing the schedules and documentation that you’ll need to submit to your lender. Some lenders have already sent out lists of documentation they will need.

Grimbleby Coleman is prepared to assist you through the forgiveness application process in several ways. We can prepare your application from information provided by you. We can review your completed application prior to submission to your lender. Or we can consult with you to answer questions and resolve uncertainties in reporting. In any case, we’re here to help.

As we’ve been doing up to now, we will continue to update you as we hear or read new information. Please feel free to contact us (contactus@gccpas.net) if you have any questions.