U.S. lenders issued more than five million forgivable loans
through the federal government’s coronavirus aid initiative for small
businesses, the Paycheck Protection Program. The Small Business Administration
in August started accepting applications to have the loans forgiven, and it
began approving them this month. Here are some things to know.
How can I apply?
PPP borrowers should apply for forgiveness through the
lender that issued the loan. The lender then submits the application to the
SBA, which makes the final determination on how much forgiveness a borrower
should receive.
Submission procedures vary by lender. Some lenders have just
begun to accept applications or have currently opened up applications to select
borrowers.
For example, JPMorgan Chase, the top PPP lender by dollar
amount, is emailing customers on a limited basis and inviting them to apply
based on when they received their PPP funds, according to Jen Roberts, chief
executive of Chase Business Banking.
“This has helped us test the SBA’s submission process and
identify some common pitfalls that we can help customers avoid,” Ms. Roberts
said.
Other lenders are still working to get technology and
personnel in place before they start accepting applications.
Borrowers may apply for forgiveness at any time before the
loan’s maturity date. However, to avoid having to start loan payments, PPP
borrowers must apply for forgiveness within 10 months of the end of their
covered period. The covered period began on the loan disbursement date and is
either the subsequent 24 weeks, or eight weeks for some eligible borrowers who
opt for this time frame.
What is required to have a loan forgiven?
To have the full amount forgiven, borrowers must spend at
least 60% of their loan on payroll costs and may use the remainder of the
funding for other eligible costs, such as mortgage interest, rent and
utilities. The amount of forgiveness may be lowered if the business reduced its
employee head count or cut salaries and wages.
Borrowers should prepare to apply by gathering documents and
taking stock of how much of the loan they have spent on allowable expenses,
focusing especially on payroll, said John Asbury, chief executive of Atlantic
Union Bank, a Virginia-based lender that issued about $1.7 billion in PPP
loans.
“See how much of this you can have forgiven based on your
payroll alone, before you start thinking about your other eligible expenses,”
Mr. Asbury said. “If you can get the whole thing forgiven based on your
payroll, you’re done.”
Lisa Simpson, director of firm services at the American
Institute of Certified Public Accountants, said some payroll-processing
companies offer reports customized to provide the information needed for the
forgiveness application, so borrowers should see if that service is available
to them.
Borrowers may also need documentation of other eligible
expenses, such as utility bills and lease agreements.
What is the application like?
The SBA and Treasury Department have issued three different
application forms, and which one borrowers should use depends on the nature of
their business, their loan size and whether they reduced employee head count or
salaries and wages.
The full forgiveness application and the EZ application both
require the borrower to calculate their forgiveness amount, make certifications
about how closely they followed program guidelines and submit supporting
documentation. The full form is longer and more complex, but only certain
borrowers are eligible to use the EZ form, such as those who are self-employed
with no employees or those who maintained salaries and wages and head count at
certain levels.
The third and most recently released application, Form
3508S, is for loans of $50,000 or less and “streamlines the PPP forgiveness
process to provide financial and administrative relief,” the SBA said.
Similar to the other applications, Form 3508S asks borrowers
to make certifications and to submit documentation to the lender.
A key difference: Form 3508S “is less about the calculations
and more about the certifications,” said Greg Clarkson, SBA division manager at
BBVA USA. “While the documentation is still required to be gathered and
provided, it is not required to be reviewed [by lenders] to the same extent
that it was in either the EZ form or the full form.”
Importantly, borrowers who use Form 3508S won’t face any
reductions in their forgiveness amount if the business lowered head count or
wages and salaries.
Several lenders and organizations are providing resources
such as checklists, webinars and online calculators to help borrowers
understand how much forgiveness they might qualify for and which of the
application forms to use. Some of these tools are free of charge.
How long will it take to get an answer?
A lender has 60 days to review the borrower’s application
and submit it to the SBA. The agency then has up to 90 days to review the
submission and issue a decision. The agency said it “expects to address the
majority of forgiveness decisions in a timely manner.”
Anything else to know?
Amid contentious negotiations in Washington over more coronavirus
aid, many PPP lenders and small-business advocates are lobbying the Trump
administration and Congress to further simplify the forgiveness process for
loans under $150,000.
Some lenders are “being careful not to put people through
the process now where it’s essentially a full-on forgiveness process that could
potentially be difficult to navigate, when new guidelines could be coming out,”
said Ryan Battles, a principal in the technology consulting group at the
accounting firm Ernst & Young, which has been helping several lenders set
up their forgiveness portals.
Given the legislative uncertainty, Atlantic Union Bank has
opened forgiveness applications only to borrowers with loans over $150,000 and
is letting customers with smaller loans know that it may make sense to hold off
on applying, according to Alison Holt-Fuller, the bank’s head of product
management.
Still, Ms. Holt-Fuller said there may be benefits to
starting the process sooner rather than later.
“If you’ve already ended your covered period, then
everything is fresh,” Ms. Holt-Fuller said. Borrowers may “lose track of the
accounting perspective of it” by waiting, she said.
Write to Amara Omeokwe at amara.omeokwe@wsj.com.
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