Automatic forgiveness? Treasury Secretary Mnuchin recently suggested publicly that the SBA should consider forgiving all PPP loans and forgoing the process of the forgiveness application. This would of course be a stunning change in direction with respect to the mechanics of loan forgiveness. There has been chatter for a while that the SBA may seek to forgo applications on “small” loans as a vast majority of the loans issued were below $150k. This would substantially reduce the workload of the lenders and SBA when it comes to processing applications, and is appearing more and more likely as the days roll on, though the actual dollar threshold is a moving target. There also has been a bit of sluggishness in the release of new FAQs over the last month, but summertime is here and who can fault the SBA employees for taking some much needed R&R. Right now we know nothing more than what we are reading online, but we will of course update you as new information comes out.
As we all know, the EIDL loan program was funded and gained a lot of traction/interest at the same time as the PPP roll out. Many companies clamored to gain access to the loan product as a result of its favorable terms (30 year repayment, 4% max rate, no personal guarantee for small loans). We are starting to see clients identify onerous covenants and reporting requirements (e.g., quarterly financial reports and year-end reviewed financials). There does not appear to be uniformity among all EIDL loan agreements, if you received an EIDL loan, it is important to review your agreement to ensure you have clearly identified all reporting requirements that are connected with the loan.
Reminder Section (what should I be doing?):
- Talk to your Payroll Company about claiming the employer payroll tax deferral and employee retention credits (ERC) that were made available in the CARES Act – see previous emails.
- Talk to your Payroll Company about claiming the qualified sick/family leave refundable tax credits (from FFCRA, passed prior to the CARES Act) – see previous emails.
- Consider speaking with your lender to discuss changes to terms of existing debt facilities.
- If you have already received a PPP loan, start forecasting how you intend to spend the funds and how you can qualify for the highest amount of loan forgiveness possible. If you are not forecasting 100% loan forgiveness, then most likely you should seek assistance regarding your particular situation. We believe the vast majority of borrowers should expect and plan to receive 100% loan forgiveness.
This information is provided by Withum. Visit Withum’s COVID-19 Resource Center for insights to help you and your business during this challenging time. Looking for more COVID-19 Funding Assitance Updates? Check out our News page.