The Paycheck Protection Program (PPP) was probably the biggest part of the CARES Act passed in late March. Since its passing, there have been never ending questions and changes from how to apply a loan to how to apply for forgiveness. This has been such an impactful piece of legislation that I will say that this has taken up more of my time over the past six months than anything else I have done. I can honestly say this as my kids remind me of it almost daily when they hear me on a phone call and ask, “Another PPP call, dad?”
The biggest hurdle facing those of you who received a PPP loan is making sure that your loan is forgiven. I probably take five to ten calls a week from clients and prospective clients discussing questions on how to go about this process. For those of you reading this article who have not applied for forgiveness, I thought I would provide a few key items to consider when it comes to the forgiveness of your PPP loan.
- Be patient, you have ten months from the end of your 24-week covered period before you have to make a loan payment. For borrowers who received a PPP loan in mid-April, the end of your 24-week covered period would have been around early to mid-October, and your first loan payment will not be due until the end of July or beginning of August. You want to focus on receiving forgiveness by the time you have to make that first loan payment.
- Reach out to your banker who you received your loan from to understand the bank’s process. Some banks have allowed borrowers to apply for forgiveness while other banks have not. Your bank may only allow a certain number of customers to apply for forgiveness each week, and you may need to wait for an invitation to submit you forgiveness application.
- If you have a loan that is less than $150,000, you may consider holding off. As of the writing of this article, as part of the new stimulus package Congress was considering a simplified forgiveness process for these loans…similar to what the SBA did for loans under $50,000.
- Understand the different forgiveness applications and read the instructions for each to determine which one you should be completing. There are three difference applications: the 3508S (for loans $50,000 or less), the 3508EZ and the 3508.
- If you have a loan that is over $2 million, the SBA is requiring lenders to have borrowers complete a loan necessity questionnaire. Be sure you have reviewed this before submitting your application as once the bank requests this document you will have ten days to complete. It is something you can prepare ahead of time and have completed waiting for your bank to request.
These are just a few key items to consider. We do have webinars and Excel spreadsheets on our website that can assist you in the forgiveness process. We also have professionals standing by to answer any questions you have or assist you in completing your forgiveness application so do not hesitate to reach out for our help! Please contact your Henry + Horne tax professional with any questions. For more information and resources on COVID-19, see our coronavirus page.
Brian Campbell, CPA