When Should I Apply for PPP Loan Forgiveness?
Get Ready, But Be Patient
“When should I apply for PPP loan forgiveness?” That’s a question many anxious borrowers are asking themselves, and wondering if now is the right time, or if they’d be better off waiting. In this particular instance, the age-old saying of “hurry up and wait” may be more appropriate answer, for a number of reasons.
No Clear and Final Guidance
Even if you consider yourself a “slam-dunk” – you’ve already spent the loan proceeds on forgivable items, you’ve calculated your loan forgiveness every which way and come up with 100% forgiveness in your calculations, and maybe it appears that a full-time equivalent (FTE) reduction safe harbor may be a sure thing.
Regardless of how many of these factors apply, many lenders are not ready to begin processing applications. Why? It’s because they are still waiting on clear and final guidance, just like the rest of us, so they can begin processing the applications correctly.
PPP Loan Forgiveness Quick Test
That’s not to say that there might not be exceptions. If your loan is $2 million or less and you’re targeting the 8-week period for forgiveness, our new PPP Loan Forgiveness Quick Test can help. Take the brief survey, and our COVID-19 Advisory Team will review your test results and contact you with recommended next steps.
For the rest of us, since you do not have to make any loan payments before you apply for forgiveness, or for 10 months after your 8-week or 24-week covered period ends (barring any unique circumstances or transactions pending), the question you should be asking yourself is: “why hurry?”
As noted above, you now have 24 weeks to use the PPP funds on forgivable expenses. This additional time allows you and your advisor to perform additional procedures to make sure you qualify for the maximum loan forgiveness and to decipher additional SBA guidance, when it is released.
Pending New Legislation
Additionally, Congress is currently mulling over a Prioritized Paycheck Protection Program (P4) package, which may or may not have an impact on your PPP loan forgiveness application.
If you’ve already taken a shot at trying to calculate the average weekly FTE for a myriad of periods, you can see that it can be overwhelming. Many payroll providers are working on programs that can customize reporting to assist you in determining FTEs, but like the rest of us, they are waiting on clear and concise guidance so that accurate reporting can be accomplished.
Lenders Gearing Up
Finally, most lenders are not ready to process forgiveness applications. As we mentioned above, the same issue applies to them, which is that there is no clear guidance from the SBA just yet. Nevertheless, some banks have signaled that they may be able to accept applications in early August.
Be Ready to Act Fast
In the meantime, our recommendation is to be patient. The guidance to date has come out sporadically, and has not cleared up all the loose ends, some which are critical to accurately determining forgiveness. Information is power, and with significant dollars on the line, you will want to have all the available knowledge in front of you prior to applying.
Lastly, we recommend that you be prepared to act fast. You should be gathering documentation needed to support payroll costs, that is if it is not too overwhelming. Keep in mind that non-payroll costs such as rents, leases, utilities, and interest documentation may not be as burdensome, and documents can be gathered rather easily.
Questions and Quick Tests
Again, if your loan is $2 million or less and you’re targeting the 8-week period for forgiveness, we encourage you to take the PPP Loan Forgiveness Quick Test. Our experts will review your results and contact you with our recommendations. If you have other questions or want to talk through a specific issue, contact us – our COVID-19 Advisory Team is here to help.