Many businesses have used their PPP loans and are now wondering when they should apply for their PPP loan forgiveness. While the answer remains unclear, there are many reasons why businesses- especially smaller businesses with smaller PPP loan amounts- should wait to apply for their PPP loan forgiveness.
Your Loan Could Automatically Be Forgiven If You Wait. New Bipartisan Legislation has been introduced and is being debated by Congress that would relax the forgiveness standards for smaller businesses that received PPP loans under $150,000. 85% of PPP loan borrowers received less than 150,000 - yet only 26% of PPP funds went to those 85% of borrowers. Relaxing the PPP loan forgiveness standards for loans under $150,000 would decrease the debt burden on small businesses. The Bill, called the Paycheck Protection Small Business Forgiveness Act, is supported by small businesses, the American Bankers Association and all 51 state bankers’ associations.
You Physically Can't File For PPP Loan Forgiveness Yet. Processing PPP forgiveness applications are dependent on "forgiveness portals". These portals vary by lender, and ultimately, are determined by SBA and US Treasury Guidelines. The SBA and U.S. Treasury can not set their guidelines for the forgiveness portals until all they issue all the details of their final guidance on the PPP loan forgiveness standards, which likely won't happen until the new relief Legislation is signed (see above). The expected date for the software platform to be used as a forgiveness portal is August 10, 2020.
The PPP Loan Forgiveness Rules Keep Changing. We keep seeing the loan rules changing and it is important to compliant with the guidelines to apply for forgiveness. In some situations, the changing rules clearly can be beneficial, such as if the Paycheck Protection Small Business Forgiveness Act passes and loans under 150,000 are automatically forgiven, extension of time to 24 weeks to use PPP loan funds and the extension to December 31, 2020 to hire new employees. However, other issues such as whether certain utilities, transportation costs, or internet can be forgiven are still critical unresolved questions, as are issues relating to whether certain business such as restaurants would be able to use more of their PPP loan percentage for rent. Waiting for new guidelines could be very beneficial for maximizing where you are able to spend your PPP loan, while also maximizing your PPP loan forgiveness.
So, when exactly do you need to apply forgiveness? The hard deadline is 10 months after the end of the loan’s covered period. You must submit forgiveness forms by that point, or the loan must be repaid.