Startups who received Paycheck Protection Program (PPP) loans under the CARES Act are wondering how they will qualify and apply for maximum loan forgiveness. At the moment, there is still some uncertainty over the exact forgiveness process.
Developing Factors that Will Impact PPP Forgiveness
While borrowers worry about the requirements and are understandably anxious to apply for forgiveness, here are several factors that will impact the process:
- Although the U.S. Treasury recently released two standardized forgiveness applications, most lenders are not yet ready to accept and process them. Many are developing internal tools and systems for an efficient process. However, they are also waiting for the U.S Small Business Administration (SBA) and the Treasury Department to issue final guidance on forgiveness to fine-tune their processes.
- Payroll costs are a significant component of PPP forgiveness, and many payroll providers are developing reports that will precisely calculate accurate forgiveness amounts. However, like lenders, they are also waiting for final guidance from the SBA and Treasury Department.
- Borrowers have 24 weeks to use their PPP loan. Those who received their PPP funds before June 5, 2020, can choose either eight weeks or 24 weeks for their covered period. That increased flexibility in the amount of time to use PPP funds can be important in maximizing the amounts utilized for qualified expenses under the program, and thus forgiveness.
- The good news: There is less urgency to apply for forgiveness because borrowers aren’t required to make any loan payments before they apply for forgiveness or until 10 months after the covered period ends.
What You Can Do Now
While waiting for final program guidance and specific directions from your lender, we recommend preparing for the PPP forgiveness application process by carefully documenting how the loan proceeds are used. Gather documentation needed to support payroll costs, either through your payroll provider or by tracking these payments manually and qualifying non-payroll costs such as rent. Once the forgiveness process starts, you’ll be in good shape to have the maximum amount of your PPP loan forgiven.