U.S. lenders have lent more than five million through the federal government’s Small Business Coronavirus Aid initiative, the Salary Protection Program. The Small Business Administration began accepting loan forgiveness applications in August and began approving them this month. Here are a few things you need to know.
How can I apply?
Recipients of PPPs must apply for forgiveness through the lender who issued the loan. The lender then submits the application to the SBA, which makes the final decision on how much forgiveness the borrower should receive.
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Submission procedures vary depending on the lender. Some lenders have just started accepting applications or are currently opening applications to select borrowers.
For example, JPMorgan Chase, the best dollar PPP lender, sends limited email to customers and invites them to apply based on when they received their PPP funds, according to Jen Roberts, CEO of Chase Business Banking.
“This helped us test the SBA filing process and identify some common pitfalls that we can help clients avoid,”
Other lenders are still working to provide on-site technology and staff before accepting applications.
Borrowers can apply for forgiveness at any time before the maturity of the loan. However, in order not to have to start paying on loans, PPP borrowers must apply for forgiveness within 10 months after the end of the covered period. The coverage period started on the loan repayment date and is either the next 24 weeks or eight weeks for some eligible borrowers who choose this time frame.
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What is needed to simplify the loan?
To simplify the full amount, borrowers must spend at least 60% of their loan on salary costs and can use the rest of the financing for other eligible costs, such as mortgage interest, rent and utilities. The amount of the forgiveness can be reduced if the business reduces the number of employees or reduces salaries and wages.
Borrowers need to prepare for the application by gathering documents and taking stock of how much of the loan they have spent on eligible costs, with a particular focus on salaries, said John Asbury, CEO of Atlantic Union Bank, a Virginia-based lender who issued about $ 1.7 billion in PPP loans.
“See how much of this you can forgive on the basis of your salary alone, before you start thinking about your other eligible costs,” Mr Asbury said. “If you can get everything forgiven based on your salary, you’re ready.”
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Lisa Simpson, director of corporate services at the American Institute of Certified Public Accountants, said some payroll companies offer reports personalized to provide the information needed for a pardon application, so borrowers need to see if the service is available. for them.
Borrowers may also need documentation for other eligible costs, such as utility bills and leases.
What is the application?
The SBA and the Treasury have issued three different application forms, and which borrower should use depends on the nature of their business, the size of their loan, and whether they have reduced the number of employees or salaries and wages.
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The full application for forgiveness and the EZ application require the borrower to calculate the amount of their forgiveness, to certify how strictly they have followed the program guidelines and to provide supporting documentation. The full form is longer and more complex, but only some borrowers are allowed to use the EZ form, such as those who are self-employed or those who maintain salaries and wages and the number of heads at certain levels.
The third and most recently launched application, Form 3508S, is for loans worth $ 50,000 or less and “streamlines the PPP remission process to provide financial and administrative relief,” the SBA said.
As with other applications, Form 3508S requires borrowers to issue certificates and submit documentation to the lender.
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Key difference: Form 3508S is “less for calculations and more for certification,” said Greg Clarkson, manager of the SBA division at BBVA USA. “Although the documentation has yet to be collected and provided, it is not mandatory for review [by lenders] to the same extent that it was either in EZ form or in full form. “
It is important that borrowers who use the 3508S form will not face any reductions in the amount of their forgiveness if the business reduces the number of heads or salaries and wages.
Several lenders and organizations provide resources such as checklists, webinars, and online calculators to help borrowers understand how much eligibility they can qualify for and which application forms to use. Some of these tools are free.
How long will it take to get an answer?
The lender has 60 days to review the borrower’s application and submit it to the SBA. The agency then has up to 90 days to review the application and issue a decision. The agency said it “expects to address most forgiveness decisions in a timely manner.”
Anything else to know?
Amid controversial talks in Washington for more coronavirus aid, many PPP lenders and small business advocates are lobbying the Trump administration and Congress to further simplify the process of forgiving loans below $ 150,000.
Some lenders are careful not to involve people in the process now that it is essentially a complete forgiveness process that could potentially be difficult to navigate when new directions can emerge, “said Ryan Battles, director of technology consulting group at accounting firm Ernst & Young, which helps several lenders set up their forgiveness portals.
Given the legal uncertainty, Atlantic Union Bank has opened requests for forgiveness only to borrowers with loans over $ 150,000 and is letting customers with smaller loans know that it may make sense to stop applying, according to Alison Holt-Fuller. , product manager of the bank management.
However, Ms Holt-Fuller said there could be benefits to starting the process sooner rather than later.
“If you have already completed your coverage period, then everything is new,” said Ms. Holt-Fuller. Borrowers can “lose track of the accounting perspective for this” by waiting, she said.
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