SBA issues guidance on forgiveness of PPP loans – Memphis Local, Sports, Business & Food News

Many of the thousands of small businesses that have received a Paycheck Protection Program (PPP) loan of up to $2 million through the Small Business Administration (SBA) are concerned about applying for forgiveness so that the loan and accrued interest can be cancelled.

While the SBA is still setting guidelines for business owners ahead of the scheduled Aug. 10 launch of the forgiveness enforcement platform, it recently released a helpful FAQ to answer and clarify some questions.

The basics and evolutions of PPP loans

PPP funds must be used within eight or 24 weeks for expenses such as rent, utilities, interest on secured loans and, most importantly, payroll, which must be 60% of use. funds.

PPP loan proceeds used for interest payments on unsecured loans, such as lines of credit or credit cards, are not included in the discount guidelines. However, loans for equipment, mortgages and other real estate are eligible for interest forgiveness.

The SBA allows the inclusion of pay periods that overlap the PPP remittance window, Lane Rhodes, financial adviser at Pinnacle Financial Partners, said in an Aug. 5 webinar.

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<p><strong>Rhodes Way</strong></p>
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<p>The period covered begins on the day the funds were paid to a company.</p>
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<p>“Initially, we had an eight-week window period,” Rhodes said.  “If you haven’t used your funds during this eight-week window, you can now use them over a 24-week window.”</p>
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<p>Rhodes said it helps businesses that aren’t operating at full capacity.</p>
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<p>Businesses choosing to use the funds over a 24-week period simply need to note this on the rebate application;  they don’t need to go to a bank or discuss the change with their <a class=financial advisor.

For each employee, the total amount of cash compensation eligible for the rebate cannot exceed an annual salary of $100,000. This does not mean that an employer cannot pay an employee more than $100,000; it just means that anything over that amount will not be forgiven by the SBA.

The new FAQ document also provides guidance for business owners who own multiple businesses. A business owner can only receive the maximum PPP rebate for a single entity.

“You can’t get forgiveness for every company. You may have received the maximum for each business, but you cannot reach the owner’s salary for each of these individual businesses that you own.

For people who have multiple businesses with PPP loans, they are capped at $20,833 in lieu of owner compensation for all loans obtained by all businesses.

The remittance guidelines also include pension and health benefits paid by the employer, but not by the employee. For example, if an employer contributes to an employee’s retirement fund, that amount may be included in the PPP rebate claim. However, if an employee contributes individually, this amount is excluded.


Small business PPP loans are more likely to be forgiven under new guidelines


It also discusses what “transportation” charges are – government-assessed utility charges. It’s different from paying gas or mileage charges, but it’s still a bit unclear.

“It’s not the clarification we were hoping for there,” Rhodes said.

The SBA has extended the period in which PPP loans must be repaid. Initially it was two years, and now it has been extended to five years.

If a business chooses the five-year option, the owner must contact the bank that originated the loan to obtain a change in the rating.

“Once you’ve applied for the rebate, and if there’s any part you need to repay, you should contact your financial adviser and let them know (that you want to extend for up to five years), and we’ll go through the process of making a note modification to pay it off over the five-year window instead of a two-year window,” Rhodes said.

Pardon Application Details and Process

There are two different tolerance apps: EZ and Full. The EZ application is much shorter and easier to complete and is useful for sole proprietors or contractors who did not have additional employees at the time of application.

The full application is longer, more complicated and includes more forms and schedules to complete. Companies will use one or the other depending on how the business has been affected by the pandemic and what decisions have been made regarding staffing and salaries.

It is possible that a third application will be released, which would be a “super EZ” application for loans below a certain amount.

If a business receives full forgiveness for the PPP loan, it receives forgiveness for principal and interest. As some details have not been resolved, Pinnacle recommends that customers not make payments until their rebate request has been reviewed and processed.

“There’s really no need to pay your PPP loan at this time until you know you haven’t used the money appropriately. If you think you’ll receive a full forgiveness, it doesn’t. there’s no reason to make a payment now,” Rhodes said.

Once a company is ready to apply for the PPP exemption, the first step is to compile all the necessary documents. This will vary depending on the type of business it is – LLC, sole proprietorship, non-profit, etc.

Rhodes said third-party payroll records are the best, if available, to show how funds were used. The SBA will also accept void checks and bank account statements.

With entrepreneurs or partnerships, a 2019 tax return with a K-1 or Schedule C may be required.

For leases and utilities, both had to be in effect by February 15, 2020. Companies will need to provide the lease agreement, utility statement for February 2020, and canceled checks or debit documents ACH to show lease and utilities as well as payments.

Rhodes reiterated that while the PPP loan funding period was “fast and furious”, the forgiveness process will be much longer.

Once a company submits its rebate request to a bank, the bank has 60 days to review it. Once the SBA receives the request, it has an additional 90 days to review it.

“We’re really advising people to wait maybe until the end of August to see how the forgiveness process is going,” Rhodes said. “If you can wait, there’s really no rush.”

To make the process easier, financial institutions such as Pinnacle have online calculators to help with the application process. Business owners should check with the bank originating the PPP loan for helpful resources and assistance.

The last day to claim a rebate is 10 months after the last day of the covered period, but no later than October 31, 2021.

You can access the FAQ document here.

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