How to Optimize Your Chances for PPP Loan Forgiveness

Q: How long does it take to determine if I qualify for Paycheck Protection Program (PPP) loan forgiveness?

A: At the time of this writing, the period to determine the forgiveness amount of a PPP loan is eight weeks, starting on the date of disbursement of funds from the lender. That period might have been extended by the time you read this. Regardless, in general the borrower must submit a loan forgiveness application to their lender, who has 60 days to determine the amount of forgiveness based on borrower records and recommend a forgiveness amount to the Small Business Administration (SBA). The SBA then has 90 days to review the lender’s calculations and agree or disagree with the forgiveness calculations.

This process includes contacting the borrower directly as well as with working with the lender to confirm the claims submitted by the borrower. If only a portion of the PPP loan is forgiven, or if the forgiveness request is denied, any remaining balance due must be repaid by the borrower on or before the two-year maturity of the initial loan.

To optimize your chances for loan forgiveness, do the work for them. Keep clear documentation on how your PPP loan money was spent. Make sure all PDFs, spreadsheets and notes are easy to read and organized in such a way that any lender or government official can follow your “treasure map” to a forgiveness calculation. SBA has provided a list of documents that they are expecting to review, and you must confirm those with the lender, since, per the SBA, “the lender is responsible for notifying the borrower of the forgiveness amount.”

Related: How do I get my Paycheck Protection Program loan forgiven by the SBA?

Since it will take a good five months for the lender and the SBA to determine your eligibility for loan forgiveness, it’s important to stay focused on your business and day-to-day operations and serving your customer base. If possible, you should assign your estimated PPP loan forgiveness calculation to competent advisors and focus your attention on your new restaurant business model!

Q: Are the rules for PPP loans and loan forgiveness set in stone?

A:  No, in fact, they’re changing all the time. Whenever a borrower submits a loan application or applies for loan forgiveness, the SBA and U.S. Treasury Department websites display the existing guidelines for the process. These are the governing rules at the time of submission, but the SBA continues to update its guidance almost daily. With this in mind, a borrower involved in any of the CARES Act programs must keep copies of both their applications and, whenever practical, the rules that existed at that date.

For PMQ subscribers and my existing CPA client base, I have created a daily video broadcast at cpastraighttalk.com. Here, I have been documenting the rules that I can locate as they change from day to day. I scour more than 40 websites for daily information on the CARES Act programs and briefly discuss in the videos how the latest info will impact your applications.

For example, the SBA clarified on May 19, 2020, that any borrower who received a PPP loan with an original principal amount of less than $2 million will be deemed to have made the required certification for the necessity of the loan request in good faith. What led to this new guidance? Not surprisingly, some businesses with no employees applied for fraudulent loans. Since more than 4.5 million PPP loans had been issued as of May 26, 2020, Congress has been pressed for resources to enforce its loan certification standards. Prior to this new updated guidance, small business owners who received loans of less than $2 million had been under a deadline to return the monies immediately or face the possibility that SBA or Treasury agents might knock on their doors and demand proof that they really needed the loans. According to the new guidelines, as long as you needed the monies to retain employees, you have complied with the spirit of the CARES Act.