PPP Loans Are No Longer Available. Here Are Some Alternatives to Consider.
Posted on 09.17.2020
The deadline to apply for a Paycheck Protection Program (PPP) loan was August 8, 2020. If you missed this deadline but still need financial assistance, there are other programs available including the Economic Injury Disaster Loan (EIDL) program administered by the Small Business Administration (SBA), as well as number of tax deferral programs created by the CARES Act.
Here are some of the basics that we know for certain about PPP loans:
- At least 60% of the total loan must be spent on eligible payroll costs over a span of 24 weeks.
- No more than 40% of the total loan may be spent on eligible non-payroll costs such as mortgage interest, business rent, and utilities.
- Borrowers have 24 weeks, not to extend beyond December 31, 2020, to use funds from the loan and apply for loan forgiveness.
- Payments are deferred until the SBA approves or denies your application for loan forgiveness. Interest will still accrue during this period and if forgiveness is denied, the borrower will need to repay that accumulated interest.
- Borrowers must restore their workforce levels and wages to pre-COVID levels within the 24-week period. The only exceptions are if a former employee refuses an offer for their former job and the borrower can show an inability to find a qualified candidate or the borrower can document the inability to return to the same level of business activity as experienced prior to February 15, 2020.
Repayment if all or part of your loan is ineligible for forgiveness.
Any amount of the loan that is deemed ineligible for forgiveness must be repaid. Amounts of loans not eligible for forgiveness and issued prior to June 5, 2020 must be repaid within two (2) years at 1% interest. Those issued after June 5, 2020 must be repaid within five (5) years at 1% interest.
Your lender is your best source of information regarding PPP loan forgiveness.
Although the SBA and Treasury oversee the administration of the PPP loan program, it is the responsibility of each lender to determine eligibility for loan forgiveness. Due to the complexity and documentation requirements for loan forgiveness as well as the significant involvement your lender has in the loan forgiveness process, they remain your number one source for answers to your loan forgiveness questions.
The process for loan forgiveness begins when you submit the loan forgiveness application to your lender. There will be numerous calculations and specific documentation requirements, which your lender will expect prior to processing your application. Once all required information is received, your lender will proceed with a “good faith review” of your application and documentation to determine the amount of forgiveness for which your loan is eligible. After review, the lender will notify you and the SBA of their determination. Additionally, the SBA reserves the right to review any loan forgiveness application and has already stated its intention to review loans over $2 million.
Should your lender determine that your loan is ineligible for any amount of forgiveness, the lender must notify both you and the SBA. You then have 30 days from that notice to notify the lender of your intention to request an SBA review of the decision. The lender then notifies the SBA of the request within 5 days of receipt, after which the SBA will notify the lender if it declines the request for review. Should the SBA accept the review request, a decision will be issued at the conclusion of the SBA’s review.