May 28, 2020

SBA Releases Guidance on PPP Loan Forgiveness

Here's what you need to know about the Interim "Final" Guidance on PPP Loan Forgiveness released by the SBA late last week:

Loan Forgiveness

The bank that issued your Paycheck Protection Program loan will have 60 days after receipt of the PPP Loan Forgiveness Application (see John Warner's blog post here) to submit a recommendation to the SBA as to the amount of loan forgiveness requested. The SBA then has 90 days after receipt of the application from your bank to conduct any further review. The SBA will then remit payment for the amount of loan forgiveness to your bank, which will in turn reduce the amount of your PPP loan as if you had made the payment yourself.

Dark Horse Observation: Even as more guidance becomes available, there will be inherent gray areas and potential differences in opinion between you and your bank. It will pay to be assertive with your bank to present the best case possible. In order to do this, you need to be educated and know what guidance to cite to make your point. Dark Horse CPAs can help you in this process if you don't want to go it alone.

Loan Reviews

The SBA has broad authority to review any PPP loans they want. They will review eligibility for the Program, loan origination amounts and loan forgiveness amounts.

Dark Horse Observation: Don't take chances...retain clear documentation and workpapers that substantiate all facets of the PPP loan from original application to loan forgiveness. Keep this documentation for six years after repayment.

We are still awaiting guidance that would either extend the 8-week covered period or create additional flexibility as to when the period could begin. Also on the table is the 75/25 rule for payroll vs rent/utilities. Ultimately, we believe it is in your best interest to wait to apply for loan forgiveness until this is made clear, unless you will qualify for forgiveness of the entire loan amount under the existing rules.

Full text of the interim final rule can be found here.

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