PPP: Don’t Rush Forgiveness

If you received a Paycheck Protection Program (PPP) loan to help your business survive the coronavirus pandemic, hold your loan forgiveness applications. The Small Business Administration (SBA), the group coordinating the program, has told lenders that they will not be accepting applications to forgive all or part of the loans until the middle of August. And maybe later, if new action from Congress changes the program again.

What does this mean for your business?

The loan will be fully forgiven if the funds are used for payroll costs (as of this writing 60% must be used for payroll) plus interest on mortgages, rent, and utilities. If you’ve already spent your loan on the things you should – and you’ve completed your “covered period,” hang tight. It’s more likely than not that Congress is going to change some of those provisions for forgiveness yet again.

Congress has already extended both the program application deadlines and the date by which you have to spend the money. Plus, word on the street has it that the procedures for loan forgiveness are going to be simplified for loans under $150,000 and $1 million. There is active discussion in Congress now to automatically forgive all PPP loans under $150,000.

Actually, hanging tight is generally good advice right now. As I noted in a previous article, preserving cash right now is good. (Shameless plug: if you need help figuring out how to reduce expenses and preserve your own cash in this new reality, let me know. That’s what I do.)

Remember that you have 10 months to apply for forgiveness from the time your “covered period” to spend the money expires. That’s a long time in the business world. Better to hold your horses and see how the economy shakes out than rush to apply sooner. Who knows what’s going to happen ten days from now, much less ten months from now.

So, while you’re waiting for final loan forgiveness procedures to be announced, keep doing what you’re doing. Keep track of what you’re spending – like you should anyway. Consult your trusted advisors for more info.

For more info on the PPP program, visit the SBA website, or contact me. I’ve walked several businesses through the initial forgiveness application process. And I’m ready to help you through the forgiveness process once that’s finalized.