By: Matt Andersen, CPA, Founder of MD Andersen CPA, PA
Your bank told you they are ready to accept your Application for PPP Loan Forgiveness. Now what?
Recently we have had several inquiries from clients over the past few weeks asking about the PPP loan forgiveness process due to email blasts coming in from banks, saying they are ready to accept applications. To date our response has stayed the same…. please be patient, because we believe with enough time the process will be simplified!
Then, last week, the Small Business Administration released a new, simplified loan forgiveness application for loans under $50,000. This is a one-page application to which the borrower affirms they met the requirements to receive forgiveness of the PPP Loan.
It had been our hope that a similar process would be put in place for borrowers under $150,000. However, to date, this has not come to fruition. Therefore, we must move on.
Before we do so, it is important to mention that the administration of PPP loans continues to evolve and could be further impacted by the outcome of the 2020 election. While some banks may encourage an early start to the application process, others are still not ready to accept applications. Is this something to worry about? Not necessarily. You currently have 10 months from the end of your covered period to apply for PPP loan forgiveness. Rather than panic about getting your paperwork together, we encourage everyone to take their time, consult with their advisors, and pay attention to ongoing developments. You can subscribe to our newsletter for legislative changes that impact small business finances.
Through our research and communication with our banking contacts, the process for forgiveness should go as follows:
- The borrower must apply for PPP loan forgiveness (SBA Form 3508, SBA Form 3508EX, SBA Form 3580S, or lender equivalent) with their lender NO later than 10 months after the last day of the borrower’s covered period.
- Within 60 days of the receipt of the application the lender must:
- Confirm receipt of borrower’s certifications
- Confirm receipt of documentation verifying payroll and non-payroll costs
- Confirm the borrower’s calculations
- Confirm that the borrower correctly applied the rule that at least 60% of the loan forgiveness amount requested is attributable to eligible payroll costs
- If the lender identifies errors or a material lack of substantiating documents, the lender should work with the borrower to correct the issues
- Once the lender makes their determination, it will issue the decision to the SBA
- The SBA has 90 days to remit the appropriate forgiveness amount to the lender. Borrowers with more than $2 million in PPP Loan proceeds will have a mandatory loan review by the SBA.
Again, we are recommending patience, but it is time to start preparing.
We will be offering a Transaction Advisory Engagement to assist with calculations, completing the Application and document gathering outlined in step #1.
Within this engagement you can anticipate two deliverables:
- Draft Application for your review and submission to your SBA lender; and
- Collection and organization of your documentation that is required to be submitted with your Application.
This engagement is a separate offering exclusively available to clients of MD Andersen, CPA, PA and will be billed at standard hourly rates. We will require clients seeking this support to self-certify the information being provided and will require an engagement letter. From information being provided by lenders, we are budgeting between 5-13 hours of work for each application.
If you are interested in becoming a client of MD Andersen CPA, please visit our services page for an overview of our accounting and tax services.
As a reminder, we are not an SBA lender. The SBA lender to which you submit your Application controls the loan forgiveness process, and we have no involvement with, or influence upon, this process. We cannot guarantee that your Application will be approved and have no control over the terms or timing of this process once you have submitted the Application to your SBA lender (see above).
We will not be responsible for the submission of your Application to your lender. In addition, the scope of this engagement does not include responding to or assisting with inquiries or audits of your PPP loan from either your lender or the SBA.
If you are a client and would like our assistance, please let us know by October 30th, 2020. We will send you an engagement letter, data request list, and get your application in the queue. If you have questions about becoming a client of MD Andersen, contact Liz Koerschgen ([email protected]) for more details.
Matt Andersen, CPA loves analyzing data, people, and businesses. He is passionate about helping entrepreneurial-minded clients achieve their goals, keep more money in their pockets, and live a higher quality of life. In addition to tax and accounting services, Matt provides one-on-one coaching for various topics including lifestyle entrepreneurship, advanced tax planning, and new business creation.