If you are currently stressing out about your loan forgiveness applications since August 10th – Monday this week, the start of submissions, allow us to break it down how everything works so you won’t rush and scramble with your paperwork.
The current status of the forgiveness application process.
To better understand why there’s no need to rush, let me share with you the 7 main factors that currently affect the application process:
#1: Technology
As you may know, the portal for forgiveness application submissions was just launched on August 10th – this week. Hence, most lenders are still developing their technology tools, otherwise known as forgiveness portals, to allow the automation of application submission and processing in their system. Unless the final legislation or technical guidance is issued, then we may expect a technical delay for processing loan forgiveness.
#2: 24-week period
All borrowers who have received their loans before June 5, 2020 can choose to proceed with either the 8-week or 24-week period to use their PPP money. This increased flexibility in the use of PPP funds (up to 24 weeks), allows them to maximize their loan forgiveness.
#3: Payroll cost
Payroll provider services are still in the process of developing their custom reports to comply with the PPP guidance, which is a significant component of PPP forgiveness. But just as lenders are still waiting on the final guidance to be issued by the SBA and Treasury, the same delay is experienced with payroll reports.
#4: Loan payments
Since payment for PPP loans are not yet due, then applying for loan forgiveness is not as urgent. Borrowers are not required to make any loan payments until 10 months after their covered loan period ends.
#5: Forgiveness applications may not be as complicated as you think it is
Thanks to the simplified process shown in the SBA Form 3508EZ, all borrowers need to do is meet at least one of these requirements listed below:
- Self-employed individuals, sole proprietors or independent contractors who had no employees when they applied for their PPP loan, and hadn’t included any employee salaries in calculating their average payroll amount in their loan application.
- No salary or hourly wage reductions for certain employees of more than 25% during the loan period, no reduction in the number of employees (no layoffs) or no reduction on the average paid hours for employees between January 1, 2020 and the end of their covered loan period.
- No reduction in the salaries or hourly wages for certain employees of more than 25% during the loan period, and were unable to operate at the same business activity level during the loan period because of the Federal safety regulations or guidance related to the covid19 pandemic.
#6: Impact on cash flow
In general, there is no benefit to receiving loan forgiveness approval right away. For one thing, it doesn’t have an impact on cash flow or on working capital if the borrower is using debt accounting for their PPP. PPP loans do not enter into repayment status until 10 months after the conclusion of the 24-week period.
#7: Any future modifications to the program and laws that affect the program
Although there have been no recent significant changes to PPP, it is anticipated that in the next round of stimulus legislation, proposals to grant automatic forgiveness to loans under a certain dollar threshold and expand eligibility. There’s a good chance that changes or modifications could happen to benefit the borrowers who have already obtained PPP loans.
Although there’s no rush to organizing and completing your paperwork for your PPP loan forgiveness application, you can find these tips useful in navigating your preparation to-do list more effectively:
- Document how your loan money was used or allocated. Gather all the documentations needed to support your non-payroll costs for expenses such as rent, lease or mortgage interest.
- Keep in mind that lenders may or may not request supporting documentation for all disbursements as part of the forgiveness application – increased scrutiny is guaranteed for loans amounting to $2 million or more.
- A recent legislation has extended the period of PPP loan applications so be patient as more changes can still modify the process and throw you off-track with your paperwork.
Count on your CPA to be your trusted adviser throughout the process. If you need any clarification or have any questions about your forgiveness application submission don’t hesitate to reach out to the experts.
For instance, you can book a commitment-free consultation with our New York Accounting Firm to discuss further about your PPP Loan Forgiveness applications so we can help you come up with an efficient process for your forgiveness application. We are not only knowledgeable about New York State Loan Forgiveness Programs, we also cater to clients from across US state lines. Whatever you may have, we can provide you with the answers and support that you need.
Drop us a message in this contact form below or you can take advantage of our commitment-free consultation and book a time with our top CPA, Josh Levine.
https://calendly.com/levine-and-associates
Meantime, keep safe. We look forward to hearing from you soon-est!