You Received a PPP Loan, What Now?
If you have received a Paycheck Protection Program (PPP) loan, then you are probably thinking what the next steps are to maximize the usage of the PPP Loan and also maximize the amount that can be forgiven. Although the PPP program funding was depleted recently, the federal government recently approved legislation to replenish the PPP program with an additional $310 billion. The SBA had until April 26, 2020 to release more guidance and regulations related to the PPP loan, but has not issued an interim final rule on forgiveness, or a final rule at this time. Since the passage of the CARES Act, the SBA has released some additional information in regards to the PPP loans, but many questions still remain. Interim final rules and FAQs have been put forth by the SBA on a rolling basis regarding specific aspects of the PPP loan. The FAQs posted to the SBA website have been updated consistently as questions have been submitted. Although the deadline within the CARES Act regarding guidance being issued on the PPP loan has passed, we expect that it will be released any moment. The lack of clear guidance, specifically on the forgiveness terms, is frustrating for small businesses that are likely in the third or fourth week of the eight week covered period of the loan at this time with no further guidance on the forgiveness provisions.
What remains clear is that further clarification of the PPP program, by the SBA, after a business has submitted an application does not invalidate that application. The SBA has not made clear how a business may supplement or amend an application, but businesses are not required to amend or submit additional information just because additional guidance was issued by the SBA after an application has been submitted. The biggest question that needs clarification at this time is exactly what qualifies for forgiveness and how. It is understood that the PPP loan has permitted uses, but how exactly the forgiveness calculation plays out is still left to be fully seen. The total amount of forgiveness is maximized by a business using the loan proceeds for the permitted uses over the 8-week covered period after funds are received, but that forgiveness can be reduced if a business does not restore the workforce headcount, or restore wages to prior levels. In short, the best advice after receiving a PPP loan is to document all uses of PPP proceeds and do what is possible for your business to maintain or increase payroll during the covered period. Once again, how the forgiveness will play out is left to be fully seen, but we hope for clarity on that issue any day now with the issuance of an interim or final rule.
There are many questions that remain to be answered by the SBA in regards to the PPP loans. It is without question that more information will be released in the coming weeks and months to provide clarity to borrowers. The guidance may come in the form of a final rule and further guidance from the SBA, but we expect that the information will be released on a rolling basis with supplemental information and clarification. Employers should continue to do what they can to maintain employee headcount and wages with PPP proceeds to maximize the amount forgiven. Employers should establish practices that will show how specifically the PPP loan proceeds are being used, maybe by utilizing a specific bank account for PPP proceeds and maintaining sufficient documentation, so it is clear to the lender how those proceeds are used. Also, questions remain as to whether it is in the best interests of an employer to utilize a special payroll run, or adjust the payroll cycle during the 8 week period to maximize payroll expenses and the possibility of forgiveness. However an employer goes about managing and using PPP funds, it is in the best interests of the employer to work with a payroll servicer or a tax professional to make sure the loans are being used in the way that maximizes forgiveness. As stated at the outset, we anticipate further clarification to be issued any day now. We will continue to provide updates and guidance on the PPP program as additional information is provided.